T N Ninan: A different country

WEEKEND RUMINATIONS

A new year has dawned. Instead of looking at the transition from one year to the next, it may be useful to look at a longer-term transition, between 1980 and now. Why 1980? Because that is the year when India crossed over from doing 3.5 per cent annual economic growth, to 5.5 per cent.

The national literacy rate as shown by the 1981 census was roughly 44 per cent; today it is probably around 68 per cent.

Life expectancy then was 50 (in other words, the average man died in the prime of his productive years); today it is 65""which means the average man is alive till more or less the end of his productive life.

Roughly half the people then were below the poverty line; today the figure is down to nearly 20 per cent. Then, 17 per cent of those in the rural areas didn't get two square meals a day; today that number is down to 1.6 per cent.

Then, the income per head was $250; now it is $600. If you look at the two sets of figures, you're really looking at two different countries.

So why is it that if we could manage 5.5 per cent growth a quarter century ago, despite all the disabilities of the time, we are able to manage only a small improvement to 6.5 per cent, or thereabouts, today?

Every socio-economic indicator points to much greater productivity: the spread of education, the years of productive life you have, whether you are better fed, and whether your income level provides you the basics.

 Also, productivity should surely improve by leaps and bounds if we have 90 million telephones, not 10 million. And if five million two-wheelers get bought every year, instead of 0.1 million (for, connectivity and mobility both help productivity).

Yet, the productivity levels in India have clearly not reached the levels that would help us do a level jump from 5.5 per cent rate of GDP growth to say 7.5 per cent""the kind of step jump that was managed in 1980.

One answer is that productivity is not determined by only these factors; there are plenty of others to take into account: the level of savings and investment in relation to GDP (more or less flat since 1980), population age profiles (we have more young people today), and so on.

While there can be several such explanations, I would think an important one to focus on at New Year's, is whether our ideas have changed to keep pace with the changing reality of the country. Or, while the country has changed dramatically since 1980, are we still stuck to the old ways of thought?

I doubt whether the Left has even one new idea that it did not have in 1980, and whether it has discarded any of the notions it held dear a quarter century ago.

Among the less ideologically driven, many people (especially in the political world) cling desperately to the idea of the public sector""even though much of the public sector is destroying capital, and doing so in a capital-scarce economy.

Most people are still uncomfortable with the level of foreign investment that would be required to drive up sharply our investment rate (and therefore the economic growth rate).

Many of the leaders of the regional political parties, able now to influence policy in both the national and state capitals, have a view of economic policy that is linked to distributional and not production issues: what can the state dole out to voters, instead of how to make investment and growth happen.

And most policymakers are still uncomfortable with the thought that a market system creates both winners and losers, among companies and people; and that the business of government is to let that process continue while taking care of the losers in the best way possible: euthanasia if it is a company, a social security system if it is people.

My thought for the new year therefore is this: India has changed, it is not what it was. Its potential is greater than its performance suggests.

We need to organise ourselves differently in order to make performance match the potential. And we need to discard old ideas if their time has gone.