Rethinking India’s Future: Prosperity of the Periphery, 2002

ISBN No. 818826201-3

“...very informative and gives insights into the role of agro-industrial revolution for the development of India, especially the rural people.” -Bhairon Singh Shekhwat, Vice President of India

“...valuable material on India’s future. We are all pushing for a breakthrough.” - Fidel Ramos, former President of the Philippines

The Group analysed vast quantities of data and interviewed a large number of individuals involved in public life to track emerging trends, analyse their consequences and offer policy guidelines to shape a brighter future for the nation….. What the report has done, in substance, is to implore the beneficiaries of the business class economy to emerge from their smug world of make believe before the rising discontent in 98 per cent of India’s population sees them running helter-skelter for cover.” -Dileep Padgaonkar, in The Sunday Times, 2002


India has three economies: Disparities in development have given rise to three different economies in India as reflected by their consumption patterns,

The Business class economy constitutes 2 per cent of the population. This segment has access to luxuries like cars, washing machines, computers, Internet, mobile phones, air travel. Their houses are fitted with all amenities, including LPG connections, televisions and telephones.

The Bike economy segment comprises 15 per cent of the population. Their consumption includes tele-visions, telephones, water and gas connections, radios, motorbikes.

The Bullock cart economy encompasses 83 per cent of the country’s population and only half of them own pucca houses, televisions and radios. These are the only items available to this segment, that cannot boast of even basic amenities and comforts.

While the business class is the focal point of most economic policies, the bike and bullock cart economies have been relegated to the periphery. Reforms have mainly benefited the business class; the periphery has been ignored. Economic reforms, introduced in the early 1990s, evidently focused mainly on liberalizing the external and financial sectors. The important changes brought about included industrial delicensing; allowing foreign direct investment; opening up of sectors like insurance, telecommunications, capital markets; reduction in import duties. The outcome was growth in IT exports to $8 billion, a surplus in the current account, accumulation of foreign exchange worth $63 billion, increase in foreign investments and a moderate boost to overall GDP growth. These positive effects have mainly benefited the narrow business class. The periphery continues to remain shackled with archaic laws like restrictions in the selling and movement of agricultural products, heavy controls on industry, discriminatory direct tax regime and several other limitations. Consequently, agricultural and industrial growth has stagnated; the farmer has been pushed into a no-hope situation; urban migration has increased; as has unemployment, crime and conflict.

Geo-economic indicators reveal that India is divided into two kinds of states. The business class exists in merely 15 cities in the country. India’s states are divided into either the bike economy or bullock cart economy depending on their rate of growth:

  • The growing states are Andhra Pradesh, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, West Bengal.
  • The stagnant states are Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Orissa, Uttar Pradesh, Uttaranchal, Assam and the north-east.

Further, India’s performance appears particularly dismal when compared to China, which has a large population like India; to Malaysia, which has a multi-ethnic population like India; to South Korea, which has a hostile neighbour like India.

Development neglect has resulted in violent conflicts in Jammu & Kashmir, the north-east and central India. India is facing violent conflicts in three zones. An analysis of conflicts in these three zones revealed three common factors being shared by all;

  • Inadequate growth opportunities in the rural economy
  • Lack of connectivity
  • Flawed governance by state governments including use of repressive measures

Scenarios for India’s Future:

There are five important drivers that determine a country’s future.

  • Growth - rate of growth, quality of growth and the scope of growth
  • Governance - participation, accountability and efficiency
  • Globalisation - trade, investment, communication
  • Geo-politics - relations with neighbours
  • God - role of religion in society and polity, values held in society
If the above 5-G framework is applied to India, then three scenarios can be envisaged for the country’s future:
  • Breakdown: If the present policy mix is extended for another decade, this would lead to a stagnating economy, collapse of civil society, internal conflicts, deteriorating relations with neighbouring countries, growing corruption and inefficiency in governance, erosion of values.
  • Break-up: If the situation aggravates further, and moves in a downward spiral, this can lead to a complete disaster, with different parts of the country moving in different directions — formally united but economically and psychologically divided. In this scenario, the country holds no respect in the world community.
  • Breakthrough: If there is a change in the policy mix, this will increase productivity and growth, not just for a narrow section of the society but also for the people living in the periphery. There will be a metamorphosis, giving rise to dynamism, resolution of conflicts, peaceful and mutually benefiting relations with neighbouring countries, governance practised with high moral principles and respect for the country in world affairs.