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Saturday, October 5, 2002

Gandhiji’s birthday celebrations this year led to some serious efforts to examine our economy and society today. I had occasion to participate in two such discussions. A couple of things struck me in these discussions. In one, a politician said that part of the reason for our underdevelopment vis a vis Southeast Asian countries and China is that we are constrained by Democracy! In the other, some participants talked of the evil impact of globalization on our economy and culture! Let us examine the facts and fiction on both these hypotheses.

Most of the SE Asian countries emerged as independent nations just like India after the war. In 1950 China and India were comparable on every conceivable social indicator and if anything, India was slightly better off.

In a modern economy the role of the state is to provide basic education, healthcare, rule of law, infrastructure and natural resource development and above all act as a facilitator in enabling its citizens achieve their full potential. This was well understood by China and the other SE Asian nations which went about systematically in fulfilling that role in a responsible manner – democracy or no democracy.

Let us look at India’s record on this front. Our literacy rate is dismal, public health is non existent, crumbling infrastructure is inadequate and there is complete absence of rule of law. India’s public expenditure on education, healthcare and social security is a grand 6% of GDP- compared to a whopping 45 % in the OECD countries. Our public expenditure on healthcare is 0.9 % of GDP (amounting to less than 20 % of the total health expenditure). This miniscule share of government expenditure in health is the lowest for any country in the world, excepting 5 other countries in the world which are all war ravaged and where there is no semblance of state (like Afghanistan)! If you think this is due to lack of resources, remember, our governments at all levels put together spend Rs 1800 crores a day!

Providing a classroom in every village for the 60 million children out of schools, entails a one- time expenditure of  Rs 16,000 crores – which is hardly 9 days public expenditure. Providing  toilets for 70 % of the population with no access to one, entails a one-time expenditure of Rs 35,000 crores – and this is hardly 20 days public expenditure. Yet the nation didn’t find the political will to accomplish this in the past 50 years. Instead, it resorts to false alibis and foolish explanations. One cannot understand how democracy prevented the state from providing these basic amenities. Democracy means liberty, equal opportunity and rule of law – it doesn’t mean anarchy, license, coercion or corruption. There is no sensible policy that is not feasible in a democracy. If anything, universal adult franchise should force politicians to make education and healthcare accessible to the poor and disadvantaged.

Let us take the other hypothesis that globalization is evil. All through history India has been a beacon and magnet for traders and we have richly benefited from the interaction with the rest of the world. 25 years ago it was quite common for a person to hitchhike from east Europe to India - all the way! Now, one can’t even go from India to Afghanistan. All through history India has been a global economy. Only an insecure nation and civilization will fear interaction with the outside world.

The reality is, the so-called globalization has bypassed India. Our share of global trade is only 0.7 % now, as opposed to 2 % in 1950. There is hardly any foreign investment in India. Our foreign debt has been stable at about $100 billion over the past 10 years. It is the internal debt which is growing rapidly. Where then is ‘globalization’ of our economy?

The march of technology and increasing global trade are inevitable. There is no way we can shut ourselves off from the rest of the world. Therefore the question should be how do we manage the effects of globalization? The threats to our economy are completely internal and not external. It is high time we gave up the usual shibboleths and excuses and focused on setting our house in order.