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Take a better look at the work of a rebounding India

Prasenjit Basu, puts it back to the doomsayers

India recently passed two milestones: the 52nd anniversary of its independence and, by some estimates, the birth of its billionth living citizen. The latter event was accompanied by a lecture from Lester R. Brown and Brian Halweil (''The Billion Mark Should Be a Sobering Feat for India,'' IHT, Aug. 11) about the need to spend on health care and primary education rather than on defense.


Virtually unremarked on Independence Day, amid the focus on military matters and next month's national election, was the fact that India's real GDP has sustained a compound annual growth rate of 6.5 percent for the last six years - a performance that makes its economy the fastest growing among the world's democracies.

Indian software exports have increased at an annual rate of 65 percent over the same period, and agricultural production by 4 percent - well ahead of the 1.8 percent pace of population growth. Food grain output has trebled in the last 30 years.

It is also worth celebrating what India is not. It is not seeking handouts from the rest of the world. (Net inflows of foreign aid amount to considerably less than $1 per person.) Nor is it among the 42 highly indebted poor countries for which debt forgiveness is now being worked out. In fact, India has never had to undertake a rescheduling of its external debt.

Better on her own:

During 190 years of British colonial rule, India was regularly afflicted by famine. Since independence it has had none. And despite some serious religious and ethnic conflict, India has remained united.

In 1947, India inherited an economy that had grown at an annual pace of 0.7 percent in the previous 50 years, less than the rate of population increase. It had an adult literacy rate of 14 percent and a higher education system oriented toward producing a narrow elite of imperial bureaucrats.

By contrast, South Korea and Taiwan at that time had adult literacy rates in excess of 50 percent (a level that India achieved only at the beginning of this decade). They had, after all, been ruled by a country, Japan, which was the first after the United States to achieve universal literacy, and so paid special attention to education. That difference in the initial endowment of human capital (plus massive infusions of external aid per capita in the early years) goes most of the way toward explaining the faster trajectory of their initial growth.

But India can and must do better. The untapped potential remains enormous, especially when you consider the talents and achievements of India's diaspora in business, technology and the professions.

For approximately 200 years, India has had a larger number of illiterate and poorly nourished people than any other country on the planet. Presumably it was not always so. According to the Yale historian Paul Kennedy, India accounted for about 24.5 percent of world manufacturing output in 1750, a share that fell to 1.7 percent by 1900 as the per capita level of industrialization declined sevenfold.

Within democracy:

Never before in human history has there been an attempt to lift a population of even 150 million, let alone 400 million, out of abject poverty within a democratic system. India is making that valiant attempt and, ever so gradually, beginning to succeed.

The point is that in the case of India, the achievement of the whole is greater than the sum of its flawed parts. Despite stresses, its society remains secular. Its prime minister may be a Hindu, but the creator of its nuclear bomb and its richest entrepreneur are Muslims, the creator of its recent economic miracle is a Sikh, and its defense minister is a Christian.

India's judiciary is lumbering and slow, but it maintains a genuine check on both the legislature and the executive. Parliament appears chaotic, but it unfailingly produces laws that are humane and faithful to the country's secular tradition. The executive is overstaffed and almost always poorly led, but it can never function arbitrarily because of the checks and balances in the democratic system.

Despite a ponderous state, economic growth has accelerated from the 3.5 percent of the first three decades of independence to 5.5 percent in the 1980s and 6.5 percent in 1990s. Inflation has rarely reached double digits, while current account deficits have usually been less than 2 percent of GDP. Only on fiscal policy have there been serious slippages in the past two decades. Adult literacy has risen from 52 percent in 1991 to an estimated 65 percent today.

Need to re-deploy:

As a democracy with functioning institutions and a vibrant capital market, India has been the great, if largely untold, success story of the 1990s. Where Russia failed, India succeeded in completing a rapid transition away from quasi-socialism. With its vast army of professionals and its abundance of labor at every level of skill and creativity, it can achieve more in the decade ahead.

What remains is for the talents of the vast rural population to be effectively deployed in labor-intensive exports, and for urban infrastructure to improve without further increasing the budget deficit.

Then, perhaps, a decade from now, India will begin to benefit fully from the return of what the late Prime Minister Rajiv Gandhi called its overseas ''brain deposit,'' and become again the economic beacon that once attracted the European explorers Christopher Columbus and Vasco da Gama.

Since this piece with the following note appeared, Dr.Prasenjit Basu has visited GNI and wrote approvingly of it. He also consented to the article appearing here.

A Special Note:

This stirring piece first appeared in the International Herald Tribune on August 20, 1999. The writer Prasenjit Basu, was then chief economist, Southeast Asia, for Credit Suisse First Boston in Singapore. He was responding to an earlier pontificating article by Lester Brown and Brian Halweil.

This piece caught the imagination of many lovers of India. It has since been republished, cited in newsgroups and attached to emails.

When goodnewsindia .com wanted to publish it, serious attempts were made to contact the Tribune and Mr.Basu without success. 

The article therefore, appears here without express permission of either.

Somehow, this article belongs here as  an ornament to the site. Help and counsel is sought from readers in answer to these questions: Do they have the necessary email addresses? Is this a serious copyright issue? How does one go about getting permission?

In the meantime, if anyone points to a serious rights violation , the article will  be taken off - most reluctantly.