Republic Day 2018 | The other side of economic growth, writes Dr Bhalchandra Mungekar

Like most post-colonial countries, India too adopted mixed-economy as a strategy of economic development. For once political freedom was achieved, immediate improvement in the living conditions was needed. This required the economy to grow fast and the task could not have been performed by private sector alone. This made the State play a leading role in the process of economic development. Thus, achieving a higher rate of economic growth, increasing employment opportunities, equitable distribution of the benefits of economic growth, and, ultimately creating a ‘welfare state’ were the main objectives of the post-independence economic policy.

Thanks to Jawaharlal Nehru who realised the strategic importance of the Planning Commission, that he formed in March 1950. Notwithstanding its limitations, the commission has performed a stupendous task in fulfilling the country’s economic goals. It is an irony that immediately after coming to power, Prime Minister Narendra Modi abolished the Planning Commission on August 15, 2014. I think it was a great disservice to the nation.

Performance of Indian economy in terms of realisation of objectives is a mixed bag. Whatever the critics of the Nehruvian economic strategy may say, during the first four decades, India’s growth performance cannot be dismissed. Development was accomplished with respect to agriculture, establishment of a network of heavy-large and capital-intensive industries both in the public and the private sectors along with medium-small and industrial units, services sector, social sectors.

Three observations could be made in this regard. First, a little higher rate of growth was possible had some distortions in the economic policy been avoided, particularly those relating to licence-permit-quota policy. Second, though growth benefited all, the privileged sections benefited the most. Third, the pre-economic reforms growth laid the foundation of Indian economy.

Thus, economic reforms certainly put Indian economy on a higher growth trajectory of around 7.5-8% annually for the entire post-1990 reforms period vis-à-vis around 5-5.5% during the 40-year preceding the reforms. After China, India is the only country to experience such growth trajectory. But while this side of the picture is gratifying,  the other side is equally disturbing.

First, of late, economic growth itself is decelerating. Second, during reforms, agriculture remained neglected and failed to have any major technological breakthrough. Third, the manufacturing sector, the main job-giver, has remained almost stagnant. Fourth, the micro-small and medium enterprises, a reservoir of jobs,  has not received the due attention of policymakers. Fifth, education and health have not been inviting adequate investment. Sixth, every reliable evidence suggests that income and wealth inequalities are fast increasing. The country needs to address these urgently. Mere political democracy unaccompanied by social and economic democracy would not lead the Indian Republic too far.

Dr Bhalchandra Mungekar is a former member Rajya sabha and Planning Commission