Monday, April 23, 2012

A toast to India…..

Two recent stories should bring cheer to us. The first one was that India had become the world’s 3rd largest economy in PPP terms, inching ahead of Japan in 2011. The 2nd one was about the Agni-5 missile that India successfully test fired yesterday. Both these stories taken together – along with several others in the recent past – highlight yet again that India continues to be the toast of the world; its progress may be doubted by some at times, but its surety of progress never!

Add to it the story of how India is negotiating hard for being granted an entry into the four multilateral institutions that regulate nuclear trade worldwide (the Nuclear Suppliers Group, the Missile Control Technology Regime, the Australia Group and the Wassenaar Arrangement). As well as the smart maneuvers India is making at getting into the UN Security Council as a permanent member and it becomes clear that India is starting to move and get noticed. The stories also provide a relief from the usual badgering that the internal politics of the country seem to be doling out. Since this blog is very much about the positive things in the country and prefers to look at the glass as half full rather than half empty, today’s post is perfectly apt.

Take the Agni-5 story first. What is particularly interesting is the amount of concern the Agni-5 launch has aroused in our neighbour China. At first, the country made attempts to underplay its importance; saying that the two countries were not in a race against each other; that both were fast growing emerging economies and both had a place in the world. But soon the Chinese media ran stories warning India subtly to not alter the balance of power in the region. But later the most intriguing of all Chinese responses was visible. The Chinese added a huge conspiracy dimension to the story by claiming that the real range of the Agni-5 was 8000 kms and that India was intentionally making a lower claim. That China felt concerned enough to try and raise the hackles of the Europeans is in a way, a certificate of the success of the Agni-5! It appears, as per the Chinese, that the Agni-5 can target all of Asia and 70% of Europe. The Chinese have also grudgingly admitted that India has entered a select club of countries that have such advanced technologies. Of course, they have also rubbished our infrastructure facilities and have claimed that it will take several years for India to deploy the Agni-5. Whatever the truth, it’s clear that we have rattled the Chinese!

Military strength plays an important role in a country’s global positioning. A militarily stronger country has a bigger swagger; no one ignores it. Of course, military strength alone is not enough, as the Russians learnt after several decades of being a military superpower. Military power accompanied by economic success is what gets a nation noticed.

That brings me to the next story. That India’s GDP has gone ahead of Japan’s in 2011 as per an IMF report. The GDP is measured in PPP terms – simplistically meaning that we remove the impact of pricing differences between countries. The same McDonald’s burger costs Rs 50 in India (approx), but $2.2 or some such thing in the US (Rs 110 if the exchange rate were taken as Rs 50 or so). In reality, since a burger fulfils the exact same need in both countries and by the exact same amount, the two should be brought down to the same price. On average, the exchange rate needs to be deflated by a factor of more about 2.5 for India. This makes the Indian GDP some $4.5 trillion in size. The Japanese GDP actually comes down a bit because of its high pricing differential. As a result, India inches ahead of the Japanese.

Now, the cynics will jump to say that we should look at per capita incomes and not absolute GDP. Of course this is correct, but in the path to progress, one of the important milestones is when the overall size of the economy grows bigger and bigger and crosses other bigger daddies. In order to remove poverty visibly and to ensure all citizens get a decent life to live, we need to grow some 8-9 times more than at present. Even so, crossing every milestone along the way should be celebrated with full gusto, not with criticism.

Over the last couple of years, we have been too critical of ourselves. Even Ratan Tata said the same thing. We have been beset by a series of scams – and even before they have been proved or disproved, political opponents of the government have put it in the dock. The CAG has added fuel to the fire by bringing out one damaging report after the other, publishing ever-rising scam figures – not bothering about not getting into policy areas. In many cases – say the subsidy policy, or the fuel pricing policy, or the FCFS policy – the government may prefer a policy of not maximizing its own revenues. As long as it ensures that its policy benefits reach the masses, it cannot be called a scam. The CAG thinks otherwise. Further, a competitive media has found the CAG’s reports to be cannon fodder for headline grabbing stories. In the meantime, the Anna struggle – fuelled again by TV channels mostly – brought much of the country to a standstill. Collectively, India was stopped in its tracks. Instead of reaching out to the world with strength, the country was hit by rigor mortis in decision making. Since every decision taken could later be considered a scam, no one wants to take decisions any longer. In the world of bureaucrats, it’s ok not to take decisions; it’s not ok to make honest mistakes. Not surprising then that the GDP growth has slowed down recently and the India story is starting to get questioned in some quarters.

But such bogus scams are starting to unravel. Earlier this week, the Adarsh scam was proved to be anything but. The land that supposedly belonged to the Army – and on which a building for Kargil veterans was supposed to be built – was shown never to belong to the Army at all. None of the former CMs who had been slurred against had any knowledge of the land’s ownership pattern when they cleared concessions to it. That should give relief to the Congress. If the Supreme Court now rules that auctions is not the only way to dispose off national assets, it will provide relief to the Central government on the 2G scam as well. In any case, apart from a Rs 200 crores charge against Raja in the DB Realty – Kalaignar TV, there is no other accusation of corruption made against any party….

The real truth is that while it’s good to be critical and clean up the system, it’s another thing to go witchhunting. It’s time our institutions – like the CAG and media – played a more responsible role. Creating an environment of sensational scams may help the opposition, but it harms us all. If decision making stops, the opposition may benefit, but the people of the country suffer.  

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