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Context:
- Sometime soon in 2018, India’s annual GDP will cross England ($2.6 trillion), but why it has taken 71 years for 1.2 billion people to cross the output of 66 million people?
Explanation:
- India’s pathetic productivity is the result of economic stories which were circulated among us after 1947.
- Not all stories have been unhelpful or unchanging; political stories have spectacularly delivered, and the British Empire story is under review.
- Post-1947 economic stories targeted the symptoms of poverty rather than the disease of productivity by distrusting decentralization, disrespecting institutions and sabotaging competition.
- The 1955 Avadi resolution gave us crappy phone service, chose colleges over schools, exploded the public sector, and kneecapped capital markets.
- These stories poisoned India’s productivity; the country has only 52 cities with more than 1 million people, only 50 per cent of labour force works outside farms, only 25 per cent of labour force has formal wage employment, only 43 per cent of 14-18 aged kids can solve a basic division problem, only 5 lakh of 30 crore students get an apprenticeship, only 7 million of 63 million enterprises were registered for indirect taxes before GST, and only 1.5 per cent of 1.2 billion citizens paid income taxes before demonetisation.
- Global GDP is churning too; the UK was 10 per cent in 1900, USSR was 14 per cent in 1960, and Japan was 17 per cent in 1990 but they are all now down 70 per cent from those peaks.
- Whereas, China’s GDP is now four times England because of leadership, luck, and a powerful story.
Conclusion:
- India is a new nation with an ancient past; the challenge is thinking about its future with stories that don’t ignore or glorify its past.
- For example, it is not the law of god that people in Asia should be poor and Pakistan is destined for greatness”, but the toxic economic stories of Quaid-e-Awam perpetuated mass poverty and Pakistan’s GDP today is less than Maharashtra.
- India’s old stories were also toxic; but its new stories of formalisation, urbanisation, industrialisation, financialisation and human capital suggest what is happening in India is not once in a decade, or once in a millennium, but once in the lifetime of a country.
- India’s new economic stories expand economic and personal freedom and recently made it world’s fastest growing economy.
