The key theme of the latest edition of the British weekly The Economist is that India's growth prospects in the coming decade is nowhere near the 10 per cent growth that was assumed until recently. India's potential growth is probably close to half of that, which is the current 5.5 per cent.
While some of the slowing is due to global issues, the edition argues, much of the pain is largely self inflicted with politicians who won't reform unless pushed to the wall because of the Indian business class who prefer to bribe their way to corner national resources, because of the high cost infrastructure and woefully inadequate education system.
The author of the piece, Adam Roberts of The Economist along with CNBC-TV18's panel of experts consisting Professor Yogendra Yadav, the renowned political scientist and psephologist from the Center for the Study of Developing Societies, Dr Shankar Acharya, well known economist and former advisor to the Finance Ministry and R Gopalakrishnan, Director-Tata Sons, discuss Adam's charges.
Below is the verbatim transcript of the interview
Q: Tell us briefly what is your charge? Do you expect this to be the decade of disappointment?
Roberts: The argument in the report is that India is aiming too low. India doesn't have the ambition, the aspiration to go for a high growth economy. It has failed to take the steps needed to take in the last seven or eight years under this government to drive that high growth. Obviously, it is bad news that the world economy has slowed and there are all sorts of unfortunate influences from outside of India, but most of the problems that India faces today are self inflicted. They are caused by the politicians of the ruling party, but also the opposition and other parties failing to get to grips with the reforms that India needs.
We would argue that the reforms that were passed or announced a couple of weeks ago by the Prime Minister and that caused the big political fallout, the storming out of Mamata Banerjee, were welcome but are very small. Those reforms, putting up diesel prices, letting in foreign supermarkets that will make some difference to India's growth story is nothing substantial enough to drive big substantial growth in the next decade or the next two decades.
The political fallout from those limited reforms is very telling. If it is doubtful that this government can really do something more radical than it has announced so far then you have to ask the question of whether India would avoid a deep economic crisis in the coming year, is there going to be a downgrade of India's debt or a serious reduction in its potential growth rate in the long term.
Q: One of the charges that Adam makes is, India may be passing through an American style robber baron phase driven by commodity boom and a shift from a closed economy to an open economy. Gloomier commentators see an outright Russian style kleptocracy. Do you think that that is a very good description of India's political economy or large parts of it?
Yadav: Partly it is. It is because they are certainly equivalent of what may be called the primitive accumulation, which is happening by simply robbing people especially of natural resources. It is also true because there is a politician, bureaucrat, big business corporate nexus, which wants to grab resources without any procedures.
I don't find it completely accurate for the simple reason that unlike the two examples of Russia and the American phase, in this instance, in India, most of these scandals are coming out in open precisely because of certain things that have happened in the overall political institutional structures.
We have the Right to Information Act, which has led to many of these disclosures. We have free and frank press which has brought these out and made political scandals out of it. Many of these scandals have emerged from the reports of the Comptroller General of India, which is a very welcome development of an institution which has stood up, not to mention the Supreme Court which has taken a strong position.
I think a fair position would require us to look at these scams not merely as an indicator of rising primitive accumulation or robber baron phase but also probably because they are more visible than before. Probably, there is more public anger than before and that probably distinguishes the Indian case from the American and the Russian case that he refers to.
Q: Apart from Adam, Raghuram Rajan, in his book, Fault Lines and several others who make the case that probably large parts of India Inc's wealth is really that of a 'rentier' that they have accumulated scarce national resources, be it spectrum, coal, mineral resources, even land and largely value added a little, but made a large amount of money because of the scarcity value of these national resources. Would you say that that is a large part of India Inc's wealth in the last 3 or 4 decades?
Gopalakrishnan: I am not able to agree that a large part of India's wealth creation from the industrial sector is coming through accumulation of natural resources, which are in short supply. It might be true to say so for the last few years, but certainly not if you take a 50 year's span of industrial development in India. I will say it is actually an inaccurate description unless you take a stock picture of what happened during the period of 2000 onwards when industrialists were better endowed with wealth and a lot of scarce national resources became available for industrial development.
If you think back to the 1900s whoever went to prospect for hydroelectric power for iron and coal mining were true pioneers. For at least 7 or 10 decades since then, it was very costly, and therefore, the question of saying they rob natural resources would be very inaccurate. If you look at the economic history of many countries, they all went through a robber baron phase. The robber baron phase is a bit like saying a human being goes through adolescence and it is something to take note of, it is something to be anxious about, but it is something to expect as natural. There are those hints in our economic development at this point of time, and that, I would agree with, has been the characteristic of the last decade.
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