BackIndia in the world: A strong foundation, but miles to go
India has come a long way since the economy was opened up in 1991 but, in some ways, we haven't changed one bit
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When we began this series a few months ago, our goal was to paint a picture of our country’s journey since liberalization. As it draws to a close, we want to show how far we’ve come as a nation.
The good news is that India has come a long way since 1991, when shaken by a deep economic crisis, we liberalized and set in motion a process, which has ebbed and flowed, but is moving in the right direction and has generated its own momentum.
Back then, India was in a deep economic crisis—twin deficits, out of control inflation and foreign exchange reserves worth two weeks of imports. We were still a large economy, the 15th biggest in the world, but were very poor. Our per capita gross domestic product (GDP) was $318, according to International Monetary Fund (IMF) data, which put us somewhere between Bangladesh and Ethiopia in the global tables. It would have taken 18 years of income for the average Indian to be able to afford an entry-level car, in 1991.
Our growth was sluggish: we doubled our 1990 GDP in about 15 years, compared with the five years it took for Thailand, the then emerging market star. And we definitely weren’t dynamic—major start-ups could literally be counted on one hand.
Today, the contrast couldn’t be starker. Our GDP is seven times larger (calculated at current prices), we are the fastest growing major economy and, at the current rate, we likely will double our GDP in about a decade. Buying an entry-level car now takes a touch more than two years of an average Indian’s income. And we definitely are a very dynamic economy: industry lobby Nasscom counts three or four start-ups born each day. In fact, with more than 4,200 start-ups, India trailed behind only the US and UK last year.
While these numbers are impressive, they are modest—especially when compared with China, which grew its economy 27-fold over the same period and is now three times larger as an economy, compared with being similarly sized way back in 1991.
Cambridge economist Joan Robinson is credited with saying “Whatever you can rightly say about India, the opposite is also true". That is true of the years since 1991 as well.
We may have made gigantic strides as an economy, but we still have miles to go as a society. We have achieved universal primary education with a 100% primary enrolment ratio, but that comes with a very high drop-out rate of 20%. Moreover, only 6% of Indians above 15 years of age achieve higher education (as per Euromonitor data), while China is at nearly 12% for the same age group.
On sanitation—a measure of human development—the less said the better. We are the worst: 44% of people still defecate in the open. Though we still pollute much less per person than other countries, we are much worse than we were in 1991. That has definitely not contributed to superior quality of life outcomes, as 10 of the top 20 most polluted cities in the world are in India. So, yes, we have made enormous progress and this seems likely to continue. But are we close to being done, satisfied with our progress? The answer should be an emphatic no.
Through it all though, it is amusing that in some ways, we haven’t changed one bit. Despite all the liberalization and globalization of the past 25 years, we haven’t lost our distinctly unique character. Our impatience, especially on the road, is second to none. Here’s a stat that comes through the noise: apparently, the average Mumbaikar honks as much daily as a German does in a full year. We continue to be better at watching international sports than playing it. We nearly doubled FIFA audience reach from 2010 to 2014 to 86 million, while simultaneously supporting a tiny field of professional footballers. And, lastly, our love of escapism (read optimism) is world-leading—more people watch Indian cinema than the fare churned out by Hollywood every year.
So, for both the better and the worse, through the accomplishments and the shortfalls, we leave you with optimism, with this most desi of isms: “We are like this only."
Dinkar Ayilavarapu is a partner in Bain and Co. and is a key member of Bain’s technology, media and telecommunications practice in the Asia-Pacific. Lalit Reddy is a partner and member of Bain’s Industrial goods and services, technology and private equity practices.
Next week: Liberalization’s lasting impact: rules-based regime, disintermediation.
This is part of a special Mint-Bain series on 25 years of economic liberalization. For more on 25 years of reforms go to www.livemint.com/liberalization
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