In the last 20 years, the Indian economy has changed unrecognizably. The classic undergraduate textbook one liner, “Indian economy is a gamble on the monsoons" which accurately described the economy at that point of time, is hardly relevant now. Nor does the famous “Hindu rate of growth" coined by Raj Krishna describe its growth dynamic anymore. At that time a growth of 3.5% evoked spiritual and material contentment. Today, twice that rate qualifies as a recession! There is need for more relevant descriptors.

One way to do it is through words that crop up every now and then in economic discussions and decision making. No longer do we find poverty alleviation, income redistribution, farm and factory productivity, which were the linchpin of debates and decision making in the 1970s and 1980s being used any more. Ideologically loaded terms such as structural retrogression has given way to simply technical “recession"; lay man’s “high inflation" has been replaced by technicians “core inflation" and Marxist’s under-consumption has lost currency to the practitioner’s demand slowdown.

Here is an attempt at a new lexicon for the Indian economy.

A: Aam aadmi—With nearly 1.2 billion of them, every sixth person in the world is an aam aadmi (common man). Over 12 Five-year Plans and 60 odd budgets, the aam aadmi, instead of becoming older has, in fact, become younger (see D). It is quite another matter that the Plans and budgets have had nothing to do with it. About one-fourth of the aam aadmi, lives on Rs27 per month, less than a rupee per day. His access to basic amenities has improved even as his entitlements have not kept pace. The paradox of the aam aadmi is that he is better off compared with himself, but much worse off compared with others!

B: Black money—India tops the list for black money in the entire world with an estimated Rs1.5 trillion in Swiss banks. To put this in context, India has more black money than the rest of the world combined. It may be argued, somewhat simplistically, that if this black money is “brought back" and distributed across the population, the per capita income of aam aadmi will double. Or that had this money been “retained" in the system over the last 30 years, India would have been the world’s largest economy after the US. But more attention needs to be paid to the “flow" of black money—the generation and accretion of it—more than the existing “stock" of black money. The former needs continual systemic reform, while the latter needs a one-time administrative action.

C: Corruption—An ever-increasing part of the black money in India is generated through corruption of the ruling class that includes politicians and bureaucrats. In the licence control raj of yesteryears, corruption was simple; generated by discretionary controls and shortages. It was petty or retail corruption. People paid money to jump the queue or access a service quicker. Now corruption is not about quicks and queues; it is about systemic disruptions. The scale, size and spread of corruption in the earlier era would, if anything, have helped income distribution in the economy (the lowly paid, service oriented made some money); the current scale of it actually worsens income distribution. And in that it reduces the overall welfare of the system.

D: Demographic dividend—What for many years used to be seen as a major handicap for India’s economic prosperity has suddenly become a major advantage. Population, which was seen as a drag and one of the biggest problems for policymakers not so long ago, is now being seen as the biggest advantage. More than 50% of India’s population, is below the age of 25 and more than 65% is below the age of 35. With a median age of 25 and 11 million workers per year expected to come over the next two decades, the India story revolves around reaping of the “demographic dividend" of the overwhelming working population with the dependency ratio of 0.4, the lowest in the world by a long way.

E: Entrepreneurship—Entrepreneurship is to the new economic system what democracy is to the political system. The state as the single largest investor has been replaced by millions of entrepreneurs across the length and breadth of the country. Their investments, collectively, are more than that of the government as well as that of the private corporate sector. There are close to 30 million micro, small and medium enterprises, contributing nearly 50% of the manufacturing sector output and 45% of India’s exports. Employing more than 60 million people, the unsung and unknown (and largely uncared for as they get less than 10% of the credit to the commercial sector) builders of the new economic story contribute more than the highly fancied corporate India. The opportunity-based entrepreneurship that has been unleashed in the last 25 years is by far the biggest gain from the change in policy regime.

(To be continued)

Haseeb A. Drabu is an economist, and writes on monetary and macroeconomic matters from the perspective of policy and practice. Comment at

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