Great expectations for India's new govt

Great expectations for India's new govt

Mr Narendra Modi's new government in New Delhi has restored the sense of excitement about India's potential both as an economic powerhouse and as a key regional power.

Many people hope and expect that under Mr Modi's government, India will recover from the political drift and sluggish growth of recent years and at last fulfil its promise as one of the indisputable great powers of Asia.

We should all hope that this optimism is justified. There is no doubt that a more prosperous India would be good for the whole region economically, and that a stronger India could do more to help build a stable and secure new order in Asia.

And equally, there is no doubt that Mr Modi has a lot to offer India. He has a clear plan to reboot economic growth, based on the successful economic policies he pioneered in his home state of Gujarat. His electoral success gives reason to expect that he will have the authority to implement his plan. And he seems to have an expansive vision of India's future as a major Asian power.

But a note of caution is in order about what the rest of the world should expect from India, economically and strategically.

Economic imperative

Let's take economics first. The plan that Mr Modi pioneered in Gujarat and now wants to apply to the whole country is based on manufacturing. This is an important shift. Much of the earlier bullishness about India's economic trajectory was based on the idea that India could forge its own path based not on manufacturing but on services.

Certainly, India has done very well in service exports because of its unusually large numbers of highly educated people. But it has always been uncertain that India could achieve sustained high growth without the primary focus on manufacturing which has powered economic take-off in every other country from Britain in the 18th century to China today.

To follow this well-trodden path, India has to start moving hundreds of millions of people from semi-subsistence farming into urban factory work.

The evidence from 200 years of industrialisation and urbanisation suggests that there are two essential preconditions for sustained economic take-off which India does not yet satisfy.

The first is mass literacy. To move from farm to factory, people must be able to read and write. Literacy in India remains low - some estimates put it as low as 63 per cent, compared with Indonesia, for example, at over 90 per cent - and literacy growth has apparently slowed over the past decade.

The second, related, factor is social mobility. People moving from village to city must leave their old community and social settings behind and create new ones. Every society finds this hard, but social conservatism seems to make it especially hard in India, and particularly hard for women.

These barriers to growth will be overcome only with bold policies, well conceived, well executed and sustained over decades.

Even for Mr Modi, this will be a huge challenge in India's factious and fractured political system, especially when so much of the work must be done by state governments over which the national government in Delhi can exercise little control.

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