India till 2030- Testing the marginal utility of political stability

A decadal “look ahead,” even as geopolitical, technological and environmental disruptions push uncertainty to worrying levels, closely resembles a fool’s wager. The upside, however, is an even chance of getting it right, just like everyone else.

DOMESTIC POLITICS — The silence of stability

Our biggest challenges will emerge from domestic politics. The political threats are not external to the BJP. The real threat is that there might be no threat at all — a bit like Indian manufacturing sheltering behind tariff walls and growing fat and complacent.

The good news is that jostling amongst the second rung BJP leaders will keep them perky and alert. But in a highly centralised — near Presidential system — their efforts matter only for their annual appraisals. They shine by aligning with the master strokes being crafted higher up.

It was no different during the previous regimes of both the BJP/National Democratic Alliance and the Congress/United Progressive Alliance — at least with respect to individual ministerial efforts made in the public interest. But then, both regimes enjoyed the plus of a “slip stream” pull effect from competitive politics. Both also laboured under the consensus building dharma of coalitions.

The real threat is that there might be no threat at all — a bit like Indian manufacturing sheltering behind tariff walls and growing fat and complacent.

Mr Modi needs to remain Prime Minister through the approaching decade to outlast Pandit Nehru’s record 17 years on the saddle or Indira Gandhi’s 15 years as PM, albeit, in two separate periods.

The BJP is likely to advance its agenda of acquiring a pan-India salience, along the lines of the Chinese Communist Party, which it, perhaps, on the surface, does resemble institutionally, with tight cadre discipline, meritocratic career progression and lots of ambition, including for deep institutional and cultural change.

Sustained national dominance, over 15 years by 2030, will attract new members. The tactic, used earlier, of granting membership to anyone giving a missed call to a designated number, may not be necessary to grow its membership to 300 million from its current 180 million (three times bigger than the CCP albeit sans the competitive, qualifying standards in China) out of an adult population of around 900 million.

GOVERNANCE — From patrimony to party networks

Can party membership replace the system of patrimonial benefits that the present system showers on elites and their followers? Yes, it can, if government employment is expanded significantly and party members “positioned” in government jobs. This is no different from the political screening that government has always done to weed out those active in extreme Left “Maoist” politics.

Till 2030, only three million party members would benefit from “lateral entry with a political twist.”

Presently, government employs around 20 million persons on which 12 percent of the budget is spent. Significantly enlarging the personnel budget will be constrained by continuing fiscal stress. More likely, one half of the officials with “generalised skills,” as opposed to professionals and scientists, would be replaced with party-vetted functionaries. But it will be a long haul, limited by the rate of natural attrition. Till 2030, only three million party members would benefit from “lateral entry with a political twist.”

ECONOMIC STROKES — From feudal to industrial patrimony

India last did well under charismatic, single party rule only just after Independence. Thereafter, “Patri-mocracy” — giving the elite of each politically significant segment, a formal role in governance — has been the glue of Indian democracy.

Cooperation by elites, across party lines, for common benefits, is best illustrated by the “cross party” consensus in Punjab against farm reform. The Farm Laws seek to usher in options for corporatisation and competitive markets versus the monopoly purchase of farm produce at administered prices by the government, buttressed by subsidised fertiliser, electricity and water.

The direct economic gains from agricultural reform are just the tip of the iceberg (1 percent of GDP). The bigger benefits come from better water use, improved finances of the electricity distribution utilities, and the unquantifiable benefits of socialising 40 percent of our population — 100 million farm families — into a globally competitive, market-based economy.

There will be more such summary reform steps. Private banks will increase in number and asset size, relieving the government from writing down the bad loans of publicly owned banks periodically — presently between 8 to 10 percent of GDP.

Liberalised labour regulations will make entry and exit easier for business. But it will disrupt the market for “lifetime job” seekers.

In business, large “national champions” — East Asian style — will progressively edge out less well-funded entrepreneurs, creating “Chaebol” like diversified groups integrating finance, industry and services.

The war on cash and “distributed corruption” will restructure small and medium industry, replacing entrepreneurs living off “tax-avoidance” — based revenue streams with other technologically competitive units integrated into domestic or global supply chains and innovative, competitive local brands.

Liberalised labour regulations will make entry and exit easier for business. But it will disrupt the market for “lifetime job” seekers. Task-focused education and continuing skills upgrades will be key for gainful employment in the technology driven, gig economy. The shortage of “good” jobs will continue. India will remain a major exporter of low-cost skilled workers.

The level of political risk for business will decline significantly. There will be fewer moving political parts to contend with. Party functionaries nominated onto their boards and within their employee structures, will align private sector and party incentives. This sounds alarming. But it happens already in a decentralised way, as TATA motors found out, when they ventured into West Bengal.

GROWTH — A return to high, single digits

Domestic political stability; closer collaboration with foreign and domestic private investors, to enhance the inflow of foreign investment to stabilise the current account and the INR exchange rate; better natural resource management and a contextual approach to human rights, will create significant opportunities for growth with shared prosperity.

GDP at US$ 5 trillion is within our grasp by 2030, despite the economic slowdown of the last three years of this decade and two of the next till 2022.

Tariff walls on imports will hurt consumer welfare and exports without growing domestic manufacturing. Nevertheless, GDP at US$ 5 trillion is within our grasp by 2030, despite the economic slowdown of the last three years of this decade and two of the next till 2022.

SOCIAL SERVICES — A fatherly hand reaches out

Social protection coverage levels will improve — pensions, income enhancement benefits, healthcare and targeted, short-term employment for the bottom 10 percent (150 million) by 2030.

Good public education at affordable prices will lag. Curricula and pedagogy will remain backward looking. The quality of teachers will remain sub-standard, negatively impacting the prospects of the bottom 60 percent who can only afford subsidized, government schools.

GLOBAL PROFILE — Continued dependence on the West

Sadly, however, India will remain an uncompetitive economy — more of a market for imported technology and goods (if not Chinese then European or American) than an exporting nation. Even in sunrise services export, the move to “big government” will stifle “animal spirits.”

Spending on external and domestic security will increase beyond the existing outlay of 6 to 7 percent of GDP.

Our Nationally Determined Contributions under the climate change agenda will be met and possibly exceeded though Net Zero will have to wait till after 2060.

Our geopolitical stance will remain combative, sitting uneasily within the US and its allies. Spending on external and domestic security will increase beyond the existing outlay of 6 to 7 percent of GDP. International collaborations for manufacturing military equipment might reduce purchase costs and generate revenue.

We shall be trading-off shrinking space for political dissent, lower accountability over government and the subordination of local to national goals for a return to high, single digit growth from 2023 onwards. Entrenched elites feel this is an unnecessary, Faustian bargain. The bottom three fourths of India will not even notice the difference.

Extracted from https://www.orfonline.org/expert-speak/india-till-2030-testing-marginal-utility-political-stability/

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