This is a make or break year for Prime Minister Modi. Unless economic growth picks up significantly in 2016 and jobs come in masses, we can forget about achhe din. The standard recipe for making a poor country rich is to export labour-intensive, low-tech manufactured goods. It transformed East Asia, China and South-East Asia into middle-class societies. But India missed this bus and today is the poorest large economy in the world with ‘less than a sixth of the global per capita income, at a level lower than Laos, Zambia, and Sudan’, as T N Ninan reminds us in The Turn of the Tortoise. We elected Modi because he promised to catch this bus.
In the early 1960s it was becoming clear to the world that Japan was creating a huge number of jobs based on the export of toys, shoes, and simple manufactures. Korea, Taiwan, Hong Kong, and Singapore saw this and quickly followed suit, like flying wild geese who follow the leader in a V-formation. All of them became high-growth economies, wiped out poverty and went on to become First World countries. The countries of South-East Asia realized this in the seventies, and followed this model to become respectable middle-income economies. China was the last to fly in the wild geese formation. It was so successful that it became the world’s factory.
Why did India fail to join the wild geese? Nehru can’t be blamed — he was too much a product of the socialist age to look eastwards. But Indira Gandhi can — she sneered at the World Bank’s suggestion that India might learn something from the Asian tigers. She nationalized banks instead, committed other lunacies, and India lost a whole generation. After 1991, the reformers did try to emulate the Asian model but the overhang of bad socialist policies and red tape defeated them. This is the first government to make a determined attempt to fix the damaging ecosystem.
Where are the jobs going to come from? Some think the manufacturing age is over — it is too automated and can no longer create jobs for unskilled farm workers. But this pessimism is overdone. Global merchandise exports are still huge — $18 trillion last year; China alone did $2.3 trillion. India’s hope of attracting these jobs depends on the ‘ease of doing business’ campaign, whose big achievements so far are the new bankruptcy law, commercial courts, and the national company law tribunal. Taken together they represent as big a reform as the GST. Success also lies in competition between states, and this too is paying off — four states have enacted serious labour reforms: Rajasthan, Gujarat, Madhya Pradesh and Andhra.
India became a high-growth economy via services and we mustn’t undervalue its role. For example, one in three cars sold in India creates a driver’s job. Around 2.5 million cars are sold each year and this means 800,000 jobs for drivers; add to this 700,000 driver jobs annually for commercial vehicles. E-commerce is also creating masses of new jobs. By 2020, it is expected to reach $90 billion in sales with 1.3 million sellers online. Each seller creates four direct jobs and 12 indirect jobs in warehousing, delivery, and support services. This adds to 20 million jobs. Some of these will replace offline jobs,but even if half are incremental, this means 10 million net new jobs.
The country is presently in a startup mania, and like all bubbles, it too will subside. But this is the first government to recognize the importance of nurturing entrepreneurs. Its Startup India campaign has announced new rules that will cut red tape, ease compliance, relying on self-certification instead of inspectors. A new entrepreneur will not need to visit an office — merely by downloading an app, he will be able to register, get approvals, and pay taxes. In the competition to attract startups, states in the south have created incubators and ‘innovation parks’.
Political leaders always need reminding why they were elected. Achhe din was a codeword for jobs and opportunities. Modi has done a good job in foreign affairs but the nation elected him to create jobs. He would do well to give foreign trips a short rest, turn over foreign affairs to the competent Sushma Swaraj, and focus with ekagrata on jobs, growth and achhe din.
In the early 1960s it was becoming clear to the world that Japan was creating a huge number of jobs based on the export of toys, shoes, and simple manufactures. Korea, Taiwan, Hong Kong, and Singapore saw this and quickly followed suit, like flying wild geese who follow the leader in a V-formation. All of them became high-growth economies, wiped out poverty and went on to become First World countries. The countries of South-East Asia realized this in the seventies, and followed this model to become respectable middle-income economies. China was the last to fly in the wild geese formation. It was so successful that it became the world’s factory.
Why did India fail to join the wild geese? Nehru can’t be blamed — he was too much a product of the socialist age to look eastwards. But Indira Gandhi can — she sneered at the World Bank’s suggestion that India might learn something from the Asian tigers. She nationalized banks instead, committed other lunacies, and India lost a whole generation. After 1991, the reformers did try to emulate the Asian model but the overhang of bad socialist policies and red tape defeated them. This is the first government to make a determined attempt to fix the damaging ecosystem.
Where are the jobs going to come from? Some think the manufacturing age is over — it is too automated and can no longer create jobs for unskilled farm workers. But this pessimism is overdone. Global merchandise exports are still huge — $18 trillion last year; China alone did $2.3 trillion. India’s hope of attracting these jobs depends on the ‘ease of doing business’ campaign, whose big achievements so far are the new bankruptcy law, commercial courts, and the national company law tribunal. Taken together they represent as big a reform as the GST. Success also lies in competition between states, and this too is paying off — four states have enacted serious labour reforms: Rajasthan, Gujarat, Madhya Pradesh and Andhra.
India became a high-growth economy via services and we mustn’t undervalue its role. For example, one in three cars sold in India creates a driver’s job. Around 2.5 million cars are sold each year and this means 800,000 jobs for drivers; add to this 700,000 driver jobs annually for commercial vehicles. E-commerce is also creating masses of new jobs. By 2020, it is expected to reach $90 billion in sales with 1.3 million sellers online. Each seller creates four direct jobs and 12 indirect jobs in warehousing, delivery, and support services. This adds to 20 million jobs. Some of these will replace offline jobs,but even if half are incremental, this means 10 million net new jobs.
The country is presently in a startup mania, and like all bubbles, it too will subside. But this is the first government to recognize the importance of nurturing entrepreneurs. Its Startup India campaign has announced new rules that will cut red tape, ease compliance, relying on self-certification instead of inspectors. A new entrepreneur will not need to visit an office — merely by downloading an app, he will be able to register, get approvals, and pay taxes. In the competition to attract startups, states in the south have created incubators and ‘innovation parks’.
Political leaders always need reminding why they were elected. Achhe din was a codeword for jobs and opportunities. Modi has done a good job in foreign affairs but the nation elected him to create jobs. He would do well to give foreign trips a short rest, turn over foreign affairs to the competent Sushma Swaraj, and focus with ekagrata on jobs, growth and achhe din.
