The year 1947, the day August 15, India gains independence from the British. But it is a bittersweet occasion, as it also marks a moment of adversity with its current neighbour; Pakistan - perhaps a harbinger of India's future as a country rife with contrasts and contradictions. The year 2007, the day August 15, a relatively sprightly 60 year-old, India shows signs of attaining a potential as true as was foreseen by its founding fathers.
On that historic day in 1947, Jawaharlal Nehru, the first Prime Minister of India, raised the Indian Tiranga (Tricolour) flag on the ramparts of Delhi's historical Red Fort. Watched by millions of newly independent Indians, the moment was heavy with singular thought of the future of a nation reborn. A future envisioned by who all sought to unshackle the enormous potential of the Indian people and the Indian nation. Standing on the cusp of a glorious opportunity, with a long and rich heritage that stretched back to the Indus Valley civilisation, India was being watched by the world. According to Mark Twain: "India is the cradle of the human race, the birthplace of human speech, the mother of history, the grandmother of legend, and the great grandmother of tradition. Our most valuable and most instructive materials in the history of man are treasured up in India only."
New Beginnings: 1947 - 1990
Post Independence, India was not the economic powerhouse it is today. The country's literacy rate was just 12.2%, while the average per capita growth was approximately 1.5%. The average per capita growth, from 1950 to 1980, across the developing world was almost 3%. The cautious policies during the tenure of Prime Minister Jawaharlal Nehru and later Prime Minister Indira Gandhi are usually considered the reason for slow economic progress. As a fledgling economy, and a nation as a whole, India's economic policies were designed to improve India from the inside out.
Some of the policies implemented during these decades included setting up government-run monopolies, regulating private enterprise and discouraging foreign direct investment (FDI). In keeping with the traditions of a pre-independent India, additional policies aimed at empowering the Indian people conversely created a negative impact. Stringent production controls, restrictions on import of foreign technologies and the creation of organised labour unions all considered instrumental in slowing the economy down and lowering overall productivity.
It was Nehru who stated, "A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends and when the soul of a nation, long suppressed, finds utterance." While the visionaries and martyrs of the ‘Quit Indian movement' and ‘Swaraj' (complete independence) profoundly understood political freedom and the need to unleash the potential of the Indian people. They, however, did not quite understand or implement the economic needs of the day.
A tumultuous road: post-90s
Under the leadership of Rajiv Gandhi, one of the country's most dynamic prime ministers, the Indian government began to implement liberal reforms, albeit to a modest degree. A clear indicator of the more liberal policy was the increase in GDP growth to 5.6%. However the policies, though well-intentioned, were myopic and resulted in a fiscal crisis in 1990. Perhaps the moment, spoken of by Nehru all those years ago, came in 1991 when the flailing Indian economy triggered critical economic reforms.
In 1991, the finance minister, Manmohan Singh, implemented policies that reduced the government's stranglehold on foreign trade and FDIs. As a fillip, to increase competition, privatisation of previously publicly owned companies opened the door to adroit entrepreneurs and foreign businesses. While these decisions raised a furore and numerous political debates, the foreign exchange reserves grew from US$5.8bn in March 1991 to US$208bn in June 2007. The last 17 years have seen India achieve an average of 6% year-on-year growth rate. From 2006 to 2007 the Gross Domestic Product (GDP) growth rate touched 9.4%, firmly establishing India as the second fastest-growing country in the world. With kudos to Prime Minister Manmohan Singh, and the IT sector boom in the late 1990s, India has experienced growth of meteoric proportions.
There is no doubt that over the last decade, India has seen a revolution in the IT sector. Lower interest rates coupled with copious amounts of capital has galvanised home-grown entrepreneurs.
The new era of privatisation in India has resulted in over a 100 Indian companies achieving a market capitalisation of over US$1bn. Jet Airways, Infosys Technologies, Reliance, Tata Motors, and Wipro have all made the leap from mere domestic companies to internationally renowned brands. Opening the door to FDI has resulted in foreign entities investing in over 1000 Indian companies listed on the stock market. 125 of the Fortune 500 companies have research and development bases in India.
Even though India is home to some of the world's richest billionaires; Lakshmi Mittal, Mukesh Ambani, Anil Ambani, Azim Premji and Kush Pal Singh, to name a few, the transition of the country from a land of outdated economics, to a land of fascinating potential is still a hard sell to most foreigners.
A contradiction: prosperity and poverty
The image most foreign investors have of India are of vast slums, poverty-stricken villages, unkempt roads and a crumbling infrastructure. With good reason, as pollution, corruption, bureaucracy, discrimination, religious violence, child labour is still the order of the day in many states.
While the major metropolises are home to 320 million Indians, from actors in the Indian film industry, software engineers and steel magnates, the majority live in rural areas of the country still untouched by technology.
Even though India is an agrarian economy employing 60% of India's labour force, this majority are the ones living on or below the poverty line. This majority includes 25% of Indians earning less than the government specified poverty threshold of US$0.40 a day.
Another not so gratifying statistic is that India is home to 44% of the world's poor and home to the world's second largest HIV population. Furthermore, at 46%, India's rate of malnutrition, among children under the age of three, is higher than Ethiopia and on par with Eritrea and Burkina Faso. The United Nations Human Development Index, which rates countries by income, health, and literacy, ranks India at 124th out of 177. Countries that rank ahead of India include the Dominican Republic, Sri Lanka, Syria, and Vietnam.
Although India has been one of the world's poorest countries, with more than 800 million citizens earning less than US$2 a day, the country has sustained a democratic government for over 60 years. The same government that acknowledged the need to spend US$150bn over the next five years to develop a world-class infrastructure. The money earmarked includes US$75bn to revamp the power sector, US$25bn for the telecommunications sector and US$50bn to upgrade airports, seaports and the road network.
With the often maligned female literacy rate of 54%, India is one of the few countries in the world that can boast a female president and a female prime minister post-independence. In addition, due to government regulations, village councils must reserve 33% of their seats for women; the result: there are more than one million elected women in local village councils across the country.
Speaking about the government, the booming telecommunications industry and the Indian Institute of Technology, which is considered the world's best are all still government run. The Indian Railways, which boast the world's most efficient railway system is government-run and officially the world's largest employer.
The World Wealth Report states that the number of Indian millionaires rose by 20% in 2005. In absolute terms, the number of millionaires in India went up from 70,000 to 85,000, a growth rate comparable to any country in the world. For every Indian millionaire, the trickle down effect of this wealth has yet to reach the rural Indian living below the poverty line.
The land of contradictions continues to amaze. Today, the effect of deregulation by the government has enabled Indian entrepreneurs to assert their financial clout globally. From Ratan Tata's US$13.7bn acquisition of Anglo-Dutch steelmaker Corus Group to Vijay Mallya's US$1.2bn investment in Scotch whiskey maker Whyte & Mackay, Indian businesses are now global conglomerates.
Where is India headed?
Before the current crop of millionaire businessmen started acquiring foreign companies in various industry segments, India found its niche in the world as an IT superpower. The latter half of the 1990s saw the government set up Indian institutes that encouraged Indians to pursue their calling in the IT sector.
The rise of well-educated and articulate Indians in addition to a favourable exchange rate spawned a new generation of outsource professionals.
While regularly caricatured in movies and comic strips, the profitability of India's outsource industry is nothing to laugh at. According to a 2007 report by Credit Suisse, India's GDP has topped US$1 trillion, making it only the 12th country to achieve this milestone. This economic growth has given rise to a new breed of consumer; young, affluent, a large disposable income and a taste for the good life.
During this era of prosperity, India is helmed by none other than the man who initiated a country-wide economic revival in 1991: Manmohan Singh.
In Singh, India did not gain a politician. Instead this chaotic, and often controversial Democratic Republic got a man who has unimpeachable integrity, is immensely intelligent, and is a qualified economist.
With a PhD from Oxford, a track record for running the country's central bank as well as the Planning and Finance Ministry, the breadth and depth of Manmohan Singh's tenure has undoubtedly helped spur the country toward its economic superpower status in recent years.
In the last three years India's main stock index, the Sensex, has more than tripled. Based on current growth, a study by Goldman Sachs predicts that over the next 50 years, India will be the fastest growing economy in the world. The report states that in 15 years India's will overtake Britain's economy, and by 2040 will boast the world's third largest GDP.
India also has a population that is younger than any other major country with 125 million Indians set to join the workforce in about 10 years. Due to this Indian professionals will be in high demand, giving rise to a population segment with a significantly higher per capita income and quicker access to investing in stylish homes, clothes and luxury goods.
All the signs point to an India with a booming economy built on its multi-faceted and diverse human resources - a clear indication that the founding fathers realised the key to economic greatness was unshackling the Indian spirit.
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