Infrastructure

A global growth engine that’s in need of a reality check

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Speaking at a Confederation of Indian Industry conference last week finance minister Nirmala Sitharaman said, “Considering our size, population and potential that India holds for good growth and building of economy, I wouldn’t hesitate here to say that we shall be the engine of global growth along with a few other countries.” It was an extraordinarily bold claim. India’s economy is expected to contract by about 10% this financial year. India’s imports in October were $33.6 billion. By contrast, South Korea’s imports that month totalled $39 billion. In October, the International Monetary Fund forecast that China would grow by about 2% this year. East Asian countries have kept covid infections and fatalities at unusually low levels. Vietnam, with 95 million people, has recorded 1,414 infections and 35 deaths. India’s cumulative infection count has crossed 10 million.

At another business association talkathon recently, telecom minister Ravi Shankar Prasad said he wanted India to surpass China in mobile manufacturing. “Now I am pushing India to surpass China. That’s my goal and I am very clearly defining it,” he said. He was speaking about the government’s Production-Linked Incentive (PLI) scheme that has attracted several global manufacturers to India with huge subsidies. As a Business Standard article reported a couple of months ago, “India’s share in the export market is 0.5 per cent, at $2 billion. China and Vietnam constitute 85 per cent of the market. Three firms—Apple, Samsung, and Huawei—account for 75 per cent of global exports. The government has a target of achieving mobile device exports of $110 billion by 2025.”

These grand pronouncements coincided with violent industrial unrest at the Karnataka facility of Wistron, a Taiwanese mobile supplier to Apple, as well as the National Family Health Survey (done pre-covid) that showed that recent gains India had made in reducing the proportion of underweight children had reversed. India already has the world’s most malnourished children.

Given this backdrop, how does one explain the unbridled optimism that radiates from Lutyens’ Delhi? It was as true of Congress ministers such as Kamal Nath, who used to say “China would be old before it was rich” to convey that India had a younger population, its supposed demographic dividend tom-tommed repeatedly at various forums. Decades ago, the economist Jagdish Bhagwati argued that India suffered from a superiority-inferiority complex: a superiority complex that was inconveniently saddled with an inferior status. This underpins India’s perennial demand for permanent membership of the United Nations Security Council.

All manner of eye-popping projections made for our dominance of mobile-phone production notwithstanding, the ministry of electronics and information technology website explained the need for subsidies in the PLI scheme in practical terms: “The domestic electronics hardware manufacturing sector faces lack of a level playing field vis-à-vis competing nations. The sector suffers disability of around 8.5% to 11% on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.” In other words, we need to make up for being laggards in providing everything that matters to global manufacturers.

But, bold claims and outlandish targets continue unabated. Last year, India declared it was open-defecation free, just in time for the Prime Minister’s deadline of 2 October 2019 to mark Mahatma Gandhi’s birth anniversary. Some experts believe, however, that India is well short of that target, and the recent health survey showing rising malnutrition suggests that that might be the case. Researchers such as Dean Spears at RICE have found a correlation between water supplies contaminated by open defecation and repeated bouts of diarrhoea that compounds child malnutrition. The tragedy is that if India spent more on increasing nutritional levels and genuinely reducing open defecation further, the dividends would be huge. The Indian Express’s Udit Misra recently cited academic research showing that the benefits ranged from $45 to $139 for each dollar spent towards a reduction in child stunting. The reason? Avoiding cognitive impairment and repeated illnesses makes for better students, more productive workers, and better life outcomes.

As it happened, I was driving through a reasonably well-off village in Karnataka just the day before the 2 October deadline last year for declaring India open defecation free and could not help noticing a child defecating by the roadside.

Nowadays, my occasional rides into central Bengaluru are no less eventful. With barricades everywhere heralding a “smart city” project, the government is simultaneously digging up roads to lay new drainage in some places and cables in others, sometimes on the same road. Even by the grotesque standards of Indian infrastructure construction, the chaos is epic. One side of the street resembles Beirut’s civil war decades ago, the other the aftermath of Japan’s Fukushima earthquake, characterised by the author David Pilling as resembling the world “vomiting its innards”. I close my eyes and meditate, imagining I am back on roads fit for Formula 1 racing in Lutyens’ Delhi, which is probably the most pampered enclave in the world. Global domination by India of almost anything suddenly seems within reach.

Rahul Jacob is a Mint columnist and a former Financial Times foreign correspondent.

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