Beware the trap of premature celebrations

Indian states have kept their schools shut for nearly two academic years. Some are re-opening now. (Photo: ANI)
Indian states have kept their schools shut for nearly two academic years. Some are re-opening now. (Photo: ANI)

Summary

We must focus on doing things right before getting too exuberant over the country’s economic ascent

In the last 18 months, I have done nearly 100 hours of online teaching. The experience makes me worry about India. Attendance is poor. Students do not turn their cameras on. We don’t know if they are present. As an instructor, I cannot look at students’ faces and figure out if they are following me. As a result, there is perhaps far less learning that happens in these virtual classes than in physical classrooms.

“Getting an education through a screen, text files, videos, and audio files simply doesn’t compare to face-to-face instruction. People don’t value this kind of education, so they don’t really commit to it," wrote Matthew Lynch in June 2019 (bit.ly/3uECBs4). This is true of online learning in general.

Indian states have kept their schools shut for nearly two academic years. Some are re-opening now. The extent of damage caused to student knowledge acquisition, be it their habits of and motivation for learning or their ability and willingness to absorb new skills, is difficult to estimate. It is unlikely to be trivial. We must factor this in our medium-term growth prospects.

Some paranoia should be our default state of mind, given the mammoth task of raising per capita incomes. Instead, a self-congratulatory tone is creeping in.

There is talk of the BSE Sensex at 200,000. In 2019, a year that India’s gross domestic product (GDP) growth cratered, there was talk of achieving a $10 trillion nominal GDP by 2030. Such talk has begun to resurface, though a recovery has barely begun. If we are to avoid another boom-bust cycle, such triumphalism is best eschewed.

We need to get a few things right.

One, targets and rankings are means to ends. The elevation of ‘Ease of Doing Business’ (EoDB) ranking to a goal in itself led to unsavoury practices, and the survey has been abandoned by the World Bank. Gains on such charts must reflect underlying improvements in operating conditions for businesses. But confusing means for ends is an endemic human failing. India’s EoDB rank was based on data from two cities. That cannot be wholly representative. Moreover, operating conditions remain difficult for small businesses. Governments alone are not at fault. For example, banks require incorporated entities to submit directors’ resolutions printed on company letterheads for the opening of bank accounts. Why? Who uses letterheads these days? Will the company’s registration number not suffice? Also, even now, for proof of a bank account, many want a cancelled cheque, though payments are mostly electronic.

Second, we remain a society of rights without responsibilities, authority without accountability, and entitlement without commitment. In general, the operating principle of governance remains one of prohibition unless an act is given explicit permission. It should be the other way around. Until that happens, the overheating of our economy after a few years of growth is a given. On its part, the private sector must imbibe the spirit that Pawan Goenka of SCALE advocates: Spell out what you can deliver to the country before placing your demands (bit.ly/3oxiYRs). If these change, a troublesome trust deficit will disappear and so will our fiscal deficit.

India’s dollar GDP stood at $2.7 trillion in March 2021. If it grows 14.86%, or the rate at which it grew in the nine years to March 2012, which was just before the Indian rupee crashed against the dollar, then our dollar GDP would reach $9.4 trillion by the end of this decade. During that nine-year period, the rupee appreciated almost every year against the US dollar, except in 2008. But we all know what came next. India spent the rest of the decade, up to 2020, digesting the consequences of unsustainable economic growth, such as a broken financial system.

Harvard University’s Centre for International Development has developed an index of economic complexity (ECI), which provides an indirect assessment of whether a country would be able to progress from low middle-income status to middle-income and then upper- income status. “Countries improve their ECI by increasing the number and complexity of the products they successfully export." (bit.ly/3ldkkPv ). India’s economic complexity index rank had remained broadly unchanged in the 40s since the beginning of this millennium. India’s index reading has improved marginally from 0.32 in 2000 to 0.46 in 2019. During the same period, China’s ECI went up from 0.44 to 1.35. Mexico went from 0.90 to 1.31.

Third, policymakers will serve India well if they focus on doing what it takes to improve India’s ECI ranking. It would mean making our universities fountainheads of knowledge, research and application. The quality of higher education needs to rise. State governments are still keen on levelling students down instead of levelling them up. Tamil Nadu’s protest against NEET is a neat example. Promoters of private universities are still figuring out the right balance between involvement and interference.

Catch-up and aspirational societies are anxious to announce their arrival. While this is understandable, it is not always advisable. That is why Deng Xiaoping wanted China to raise its head slowly. India would do well to heed his advice and focus on doing the right things. Results will follow.

V. Anantha Nageswaran is a member of the Economic Advisory Council to the Prime Minister. These are the author’s personal views.

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