India 1989-2014 and after — A Paradigm Shift
December 16, 2021
"Why China, why not India?” is a question debated in India without a credible answer. — S. Gurumurthy
"Why China, why not India?” is a question debated in India without a credible answer. Asking an identical question, “Why China flew, India just grew?” Forbes magazine (2019) answered that it was because of the barrier-free autocracy in China and nightmare democracy in India. Forbes pointed out that in the 1980s India and China were on par, but by 2018, China’s per capita income grew to 3.5 times India’s. To drive home its point, Forbes compared how China constructed the Three Gorges Dam on Yangtze river with how India built the Narmada Dam.
Yangtze vs Narmada
The Three Gorges Dam flooded 13 cities, 140 towns, 1,350 villages and displaced 1.2 million people. Yet, China completed it in a decade. In contrast, the Narmada Dam flooded no city. Inundated no town. Impacted far less villages, just 178. And displaced less than 1/10 of the people the Chinese dam had. But how long did India take to complete the Narmada Dam? 48 years! Jawaharlal Nehru laid the foundation for it in 1961. The World Bank agreed to fund it in 1985, but went back after Narmada Bachao Andolan (NBA) began its agitation.
The NBA moved the Supreme Court, which stayed construction in 1995. In 1999, the Court lifted the stay, limited the dam height to 88 metres, but later over 19 years, raised the height in five painful instalments — in 2000 to 90 metres, in 2002 to 95 metres, in 2004 to 110 metres, in 2006 to 122 metres, and in 2019 to 139 metres, its full capacity. Democratic India’s Narmada Dam took five times longer to build compared to autocratic China’s. Why, then, wouldn’t China fly over just growing India, asked Forbes. But the magazine missed the wood for the trees. For 25 years (1989-2014) India had only rickety, compromising coalitions, which had debilitated the economy. This is what Forbes sadly missed.
4 elections, 7 PMs in 10 years
In 10 years, 1989-1999, when globalisation was opening the lucrative Western markets to the rest, India saw four parliamentary polls and as many governments with seven prime ministers. V P Singh, 11 months. Chandrashekhar, 4 months. Narasimha Rao, 5 years. Atal Bihari Vajpayee, 13 days. Deve Gowda, 11 months. Inder Gujral, 11 months. And Vajpayee again, 13 months. Would the West look at India, the duration of whose governments were measured in months and days, instead of China, which was firmly under one man, Deng Xiaoping? Hoping to make the stable China a democracy rather than attempt to make the Indian democracy stable, the US began “positive engagement” with China in 1993.
Things did improve for India between 1999 and 2014 when India had multi-party coalition governments for full terms. Vajpayee, who had better control over his coalition, had earlier even boldly opted for the Pokhran II explosion. But according to Sanjaya Baru, Dr Manmohan Singh’s media advisor, Singh was just a proxy for Sonia Gandhi who exercised real power. How long would the 10 Indian governments that ruled between 1989 and 2014 last in office was always a question. Result, a whole generation of Indians had lost hope that India could ever have a stable government with absolute majority under a strong leader, like say Indira Gandhi. And so did the world. This swung the world to China.
In 2014, when Narendra Modi won an absolute majority after 30 years, the paradigm shifted and stunned the world. Not just Modi, Indian democracy gained the world’s confidence to the extent that in 2019, US magazine Foreign Policy even said Indian democracy “is the silver lining, even golden lining of democracies” in the world. Had an elected Indian government with a majority of its own been in power in the 1990s, like in 2014, autocratic China would not have been the default choice of the West. When India changed hands from one PM to another seven times in 10 years, would the West need a better reason to turn to China? Result? The early bird China wrapped up 70 strategic partnerships by 2020. But including the US-India nuclear deal by Dr Singh in 2008 risking his government and Sonia’s wrath, the late entrant India could manage only 20. No nation would choose India — whose government could fall the next day — as a long-term partner. This is what changed in 2014. The result was instant. Modi soon emerged as a global leader.
According to the monthly survey of US-based Morning Consult, since January 2020 till now, Modi remains at the top among 13 leaders from the US to Australia in the global leadership approval ratings. Long used to be led by others, India is now playing the lead role in the multilateral fora. The latest G7-plus, G20 meetings and the COP26 conclave testify to India’s lead role. The world is now undoubtedly turning to India like it was turning to China in the 1990s. The UBS Evidence Lab CFO Study, Information Technology and Innovation Fund research, Bloomberg report and Qina Report point to the US and the West shifting away from China to India. Japan-Australia-India trade ministers held a virtual meeting in April 2021 to move away from China in 5G and semiconductor tech businesses. By the strategic Pokhran II, India shed its reservation about global power play. With the people of India giving him full majority, Modi has actually led India into the global power play.
Plans, to develop
Backed by the absolute majority from the people, Modi set such long-term goals, planned on such scales as not imagined in India earlier. Result, in the seven years from 2014, he succeeded in executing massive schemes like opening bank accounts for 43.81 cr unbanked poor; installing 11.5 cr public and private toilets; achieving six lakh-plus open defecation-free villages; building 2.33 lakh-km long rural roads; constructing 2.13 crore houses for the poor; electrifying all villages; providing electric connections to 2.81 cr homes; fixing 37.8 cr LED bulbs to reduce power consumption; laying optical fibre to 1.69 lakh villages; giving free cooking gas connections to 8.7 cr homes; extending medical insurance to 25.6 cr people, life insurance to 11.16 cr, crop insurance to 11.6 cr farms; putting cash directly in 11.77 cr farmers’ bank accounts; issuing 22.81 cr soil health cards; lending to 33.8 cr micro businesses; bringing 3.42 cr people, plus 55 lakh self-employed under pension schemes; linking 1.71 cr farmers under e-market; connecting 1.85 cr students and youth with online courses for skilling; arranging 1.46 lakh post office payment banks in villages; issuing 129.5 cr Aadhaar identity cards to every Indian resident and 4.9 cr biometric identity certificates. The list goes on.
The speed with which he worked his plans is measured by just one fact. Till 2014 — in 64 years — the length of national highways built was 91,287 km; but in Modi’s seven years alone it was 46,338 km — 50% more. Modi’s development plans are intensely integrated. He could not have opened tens of crores of bank accounts for the unbanked without providing Aadhaar card to all, without connecting lakhs of villages by optical fibre, without lakhs of doorstep post office banks or without laying lakhs of kms of village roads. Nor without these could he have provided several tens of crores in medical insurance, crop insurance, life insurance, soil health cards, toilets, cooking gas connections, health cards or put cash in tens of crores of farmers’ bank accounts. One would not have been possible without the other or others.
Purgatives, to detoxify
He also administered unpopular purgatives to the economy like demonetisation (DM), GST, bankruptcy law, privatisation of PSUs to make his long-term development plans work. Many fault DM for failing to catch black money hoarders red handed while exposing people to hardship. But what was missed was that DM was a multidimensional venture. It brought the informal and black trade into registered accounts. But for DM, the taxpayer base of India which was 3.79 cr till 2016, would not have shot up to 6.84 cr in 2018 — a rise of 80%. The tax-GDP ratio, too, would not have gone up. Had the parallel black trade continued as before DM, GST mop-up could have failed miserably. That could have threatened states’ finances and the federal structure itself, even caused financial emergency. State Bank of India’s two latest Ecowrap research reports (Nov 1 & Nov 8) have brought out the truth about the unpopular DM. It says because of DM, the Jan Dhan bank accounts rose by 5.7 cr; digital transitions from 182 per 10K in 2014 to 13,615 in 2020 — by 135 times; ATM network growth, that indicated cash drawls, has flattened; the savings in the Jan Dhan accounts has risen to Rs 1.40 lakh cr.
It also says DM, GST and digital transactions have reduced the share of the informal economy from 54% in 2014 to 15-20% in 2020-21. The formalisation extended to 36 lakh jobs, says the Employee Provident Fund office, and to 5.7 cr unorganised workers — mostly in Bengal, Odisha, UP and Bihar in that order — as per government’s E-Shram portal. Cash use of Rs 1.2 lakh cr, agricultural credit of Rs 4.6 lakh cr, and petrol/diesel purchase of Rs 1 lakh cr have also been formalised through bank or digital transactions. The outcome of the formalisation is higher GST collections. For October 2021, GST collection is Rs 1.30 lakh cr. Ecowrap (8.11.2021) also brings out the social benefits of the rise in Jan Dhan accounts and says it has reduced alcohol & tobacco consumption, wasteful spending and crime rates! Truth always emerges, but late.
Forbes went wrong
Integrating development plans with purgatives to detoxify and formalise the Indian economy reflected the Modi government’s long term vision. But neither could have been possible without the other. And, both would have been impossible without bold leadership. Nothing would have been possible had Modi not won absolute majority for the second time. Forbes was wrong in faulting democracy. As the dynasty-led Congress declined, Indian democracy was in distress for a quarter century. Narration of what an absolute majority rule with bold leadership could do cannot be complete without saying how India handled the Covid challenge.
Modi’s greatest challenge came within months of winning the 2019 elections. The mysterious Covid-19 hit India. With no textbook model to counter it, Modi had to innovate, experiment with risky, unorthodox, unpopular ways to stop it, but failed. That disturbed the people, crashed the economy, inviting the Opposition to go ballistic. Seeing a golden chance to cow him down and India, China began spilling blood on the borders. Facing the worst challenge from within and outside, which was exploited every minute by the Opposition, he focussed on his Indradhanush Mission to produce Made in India vaccines for Indians.
How important it is can be measured by the fact that in the past, foreign made vaccines took as long as 17 to 60 years to reach India. Had India depended on foreign-made Covid vaccines, first it would have become bankrupt paying for it, and next, it could never ever think of relief from Covid. Millions would have died. As Modi doggedly rooted for Made in India vaccines, the Opposition even cast doubts on its efficacy, causing vaccine hesitancy. Finally, India, one of the earliest, now the largest, producers of Covid vaccines, has vaccinated the largest number of people fully and partially. India has well confronted Covid compared to the best of the world. If the Indian economy is looking up today, credit should go to the Made in India vaccine.
This is where post-2014 India stands. Imagine a rickety, compromising coalition in its place with some proxy prime minister. Where would India have been with the Covid devastation from within and China firing at the border? This is the difference between India during 1989-2014 and after.
S. Gurumurthy: Editor, Thuglak, and commentator on economic and political affairs