Opinion An Escher print called India

Let me list what I believe to have changed for the better. I was amazed at the availability of consumer goods at international or even lower prices. That is a sea change from 12 years ago,one that has increased real purchasing power. Indian industry has risen to the challenge of low import tariffs with tremendous gusto. India is no longer an island of somewhat quaint and expensive consumer products,such as the venerable Hindustan Ambassador. It has grown into a large and confident player in global markets. New modern cities seem to have sprung out of the ground,reflecting the industrial surge and impressive growth of what is now a huge middle class.

Let me add that I saw fewer beggars in Mumbai and Delhi than a decade ago. The number of Indians living in poverty has remained more or less the same,but the proportion of very poor persons is now lower,which accords with my fleeting impression. I find it awesome that India’s income inequality,even though it has increased,is lower than in the US.

I am also impressed by the things that get done. For instance,Delhi’s metro — nearly 200 kilometres,and built in very few years. Delhi’s motorised rickshaws may look like antiques,but now run on low-pollution compressed natural gas. Together with the metro,the use of CNG has reduced air pollution. India’s biometric ID programme is reaching hundreds of millions and will cut down on fraud. So will the RTI Act,a counterweight to traditionally overbearing and largely immune bureaucrats.

Finally,a remarkable amount of thinking focuses on the “base of the pyramid”,that is,low-income persons,including those living in rural areas. Ingenious solutions are found,which bring services (health,insurance) within reach of low-income families,as well as goods. Naturally,not all such innovations pan out — I didn’t see a single Tata Nano during my stay — but Indian companies clearly lead the world world in scalable social enterprise.

What has not changed? While infrastructure has improved sporadically,the overall situation remains parlous. For the most part,power generation,rail,road,ports and airports,evoke the bullock rather than the tiger. Interviews with rural households suggest that roads are so bad that transport accounts for a big share of total healthcare costs. Public education leaves much to be desired,especially in rural areas,where reading and arithmetic outcomes are dismal. Lack of cold storage and bad transport infrastructure cause huge spoilage losses. Much also remains to be done to extend the reach of clean water and sanitation. Four out of five villages lack public health services. This matters because two-thirds of Indians live in rural areas. More than 80 per cent of cultivators have less than five acres of land.

At the other end of the spectrum,employers complain of a growing skills shortage. What they mean are practical,real world,problem-solving skills,not the ability to achieve stellar exam scores. Even top Indian schools and universities produce graduates who may not be prepared for corporate work life.

Such long-standing,pervasive weaknesses will only be remedied slowly. The government seems to be trying to bypass existing structures,planning for large-scale investments such as the Delhi-Mumbai transport corridor which includes Japanese-built high-speed trains and brand new future mega-cities; and public-private partnerships to build modern ports and airports. In the same vein,private education at all levels is a booming sector.

How then to explain why the Indian economy is surging ahead on the world scene ? Whence the bullock’s turbo? I believe the last two decade’s “turbo” is a combination of good policy and critical mass (or scale).

China’s and India’s economies were drastically suppressed for decades. China’s economy began to grow as soon as farmers were allowed to sell what they grew at market prices. This generated new rural purchasing power,which powered sounder industrial growth. India’s “licence raj” was milder,but still hemmed in productive energies. The post-1990 liberalisation freed these energies,unleashing investment,production and productivity. The challenge,20 years into the reforms,is to maintain momentum. The answer lies in sound macroeconomic policies — reducing subsidies to politically potent large-scale farmers ranks high on the priority list,as they drain the public sector of much of its spending power. Crucial areas like higher education are yet to be liberalised. Besides liberalisation and reasonably sound macroeconomic policies,India shares with a handful of emerging economies a trump card: scale. Owing to the vast absolute size of India’s population,its development efforts have been able to generate large numbers of highly-skilled professionals. Sheer numbers make it possible for India to be among the top scientific nations. This is why India has emerged as a major hi-tech player; why foreign companies are doing R&D in India. On top of this,the use of English,“globalisation’s lingua franca” gives India an advantage over some other large nations,greatly facilitating integration into the world’s knowledge economy.

The writer,a former chief economist at the International Finance Corporation,is CEO of the Global Business School Network