Whither India and its economy

For the past five years I have been sitting in India's cockpit, the national Planning Commission, from where I could get a perspective of the changes sweeping through India. Every year Chief Ministers of all Indian states come to the Planning Commission to explain the progress their states are making and
the challenges they are facing. The Planning Commission oversees the central government ministries too and all sectors of the Indian economy. When the Planning Commission prepared the country's 12th Five Year Plan in 2012, it deployed a process for the first time to listen widely to the people of the country. Almost a thousand civil society organizations representing all sections of Indian society and dozens of business associations participated in an exercise to gather the views of citizens about what mattered most to them and the opportunities they saw for change in the country. With these myriad inputs from many perspectives, and using techniques of systems analysis and scenario planning, we were able to see the principal forces that are shaping India. And we could hear the signals beneath the deep rumbling of Indian democracy.

From this vantage point, one can look back along the road we have traversed in the last ten years. Niranjan Rajadhyaksha, executive editor of Mint, explains how economic conditions have affected Indian citizens. He uses a variation of the 'misery index' that economist Arthur Okun used to measure the performance of the US economy. Okun added up unemployment and inflation rates, the two principal ways in which the economy affects well-being of citizens. Since an accurate measurement of unemployment is hard to come by for India, Rajadhyaksha substitutes GDP growth as a measure of opportunities for employment. This is also consistent with the view that driving up GDP growth will produce the most benefits for all citizens. He assumes an inflation threshold of 6%, above which, and a GDP growth threshold of 7%, below which, citizens' misery is high. Then he plots the economy's performance over the past ten years. In UPA1, the misery level was below the threshold. In UPA2, with persistent high inflation and sharply declining GDP growth, now down to below 5% for two years in a row, the citizens' misery index has escalated high into the red zone.

Some believe that the Government has not done a good job of communicating to citizens about the progress made in the last ten years. Belatedly, reams of numbers-of schools built, bank accounts opened, roads constructed, etc-have been splashed around in the media. No doubt India is progressing. But the progress is slower than many other countries; is much less than the country's potential; and much less than what the country needs for faster, inclusive growth. Looking back at the half of the glass that has been filled is comforting only if one refuses to look forward at the half (or more) that needs to be filled very urgently. Clearly the country cannot carry on with the approach it has taken to fill the glass so far. It needs new strategies to fill the glass much faster.

These advertorials seem to have missed what the citizens have been wanting more of in the last few years. An entertaining TV advertisement reminds citizens that they have cellphones, ATMs, flyovers, Metros, and new airports. It is worth noting that Delhi's citizens, who have all these, dramatically voted out the Government that had given these. Clearly citizens want something else too. They want institutions that respond to their needs and they want less corrupt institutions.

Running parallel with the economic misery index in the last ten years has been the increasing mistrust of citizens in many of the country's principal institutions-political parties, government, regulators, and big business too. To the spreading stain of violent movements of protest in tribal areas, movements of protest in urban areas have been added when middle class citizens began conveying their dissatisfaction to the political establishment through an increasing number of PILs, social media campaigns, and street protests. A smug political establishment tried to shut down these protests with the argument that the only way citizens must be allowed to participate in democracy is by electing their representatives. 'You have elected us, now leave it to us', they said. And, some leaders even said, 'Since you have elected us you have proved you trust us: now it is wrong of you to doubt us.' They seemed completely out of touch with the people. The consequences of the rising mistrust have been hold-ups in implementation of projects and a creeping policy paralysis. These, in turn, have caused investments to slow down and growth to decline, further feeding the citizens' misery index. Thus the country has got caught in a vicious cycle.

Well designed and smoothly functioning institutions are the airplane in which a society and an economy progresses. The condition of India's governance institutions has been neglected too long. New political formations that made institutional reform their principal agenda have been welcomed widely. When they began redesigning the airplane in flight, however, the disturbance to the established order has created consternation. Many are asking: whither India? In the next piece, I turn to look at the ten years ahead into scenarios of India's future.