India At 75: A Passage Through Crises And Transformation

This week India is celebrating the 75th anniversary of its Independence. At the dawn of freedom, as the nation embarked on its date with destiny, the odds were stacked against India – barely two of ten persons were literate and nearly every second person of the 359 million populace lived below the poverty line. In 2022, India’s GDP is over $3 trillion and is on course to be the third-largest economy in the world by the end of the decade. A nation which was written off by the Colonial Cassandras as they departed in 1947 has proved sneering sceptics wrong.

The journey from penury to the promise of prosperity though was not planned or ordained. Change and transformation came as accidental consequences of a nation forced to shed the convenience of the status quo to adopt radical change. As I chronicled and established in my book Accidental India, India’s transformation has been propelled by crisis after crisis and compelled by the need to resolve the crisis of the day at all costs.

Liberation Of The Economy

India got political Independence in 1947 but the economy had to wait all the way till 1991 to be liberated. Over half of India’s population born in the nineties would scarcely know of a nation living in need – when people booked a two-wheeler and waited for a decade for delivery; when citizens had to plead and petition a local Member of Parliament for a gas connection or a telephone connection; when buyers had to choose between two brands of cars.

In 1952, soon after attaining freedom, the government chose to adopt the Harrod-Domar model of economic development and state-led industrialisation. This was executed by what S Rajagopalachari memorably dubbed as the ‘licence-permit raj’. For four decades the government believed it could design and dictate the course of the economy through controls on who would produce what where how much and at what price it would be sold.

That it was not working was evident within the first decade and reflected in data. Change came in the wake of crises – every indicator was flashing amber and red from the mid-eighties. The Berlin wall had fallen and Prime Minister Chandra Shekhar recognised the need for radical change. In 1991, as the country’s foreign exchange reserves dwindled, left with dollars just enough to pay for just one week of imports the government sought a bailout from the IMF.

Relief came with conditionalities. India was required to do its part. Over 40 tonnes of gold reserves with the RBI were pledged for loans. At the IMF Gopi Arora and team dusted a 1990 note authored by Amarnath Verma and Rakesh Mohan advocating the dismantling of licence raj as one of the 26 conditions of the promissory note. The U-Turn, from a closed to an open economy, required political leadership. The wily P V Narasimha Rao deployed the crisis and leveraged the political schisms to dismantle the licence raj and open up the economy.

A Parade Of Revolutions

A noticeable fact in the history of India’s political economy is the recurrence of the phrase ‘revolution’.

The green revolution, milk revolution, software revolution and so on. This is explained by the fact that change takes decades to manifest and has to be engineered by the external force of a crisis.

Take the ‘Green Revolution’. This February, the world was caught in a food supply-and-price crisis after Russia invaded Ukraine. India was atmanirbhar and had buffer stocks. It stepped up providing grains to Egypt, Sri Lanka and other countries. India was the clear outlier in the global crisis. This was not always the case.

When India got its freedom it was dependent on food aid and imports for milk and baby food. U.S. President Harry Truman enabled food aid via the India Emergency Food Aid Act. This was followed by Dwight Eisenhower institutionalising Public Law 480 subsequently renamed ‘Food for Peace’ by the JFK regime to expand access to food grains. Indeed in 1967 William and Paul Paddock cited India’s rising population and dependence as a test case in their book ‘Famine 1975!

India, caught in two successive years of famine, found food aid was capped by the Lyndon B Johnson regime. Johnson told his Agriculture Secretary Dean Rusk “we can’t keep doing it forever” and India got tagged as a ‘ship-to-mouth’ economy. Crisis, shame and shortage triggered the impulse for the “Green Revolution”. Lal Bahadur Shastri and Indira Gandhi propelled funding for the programme led by C Subramaniam by MS Swaminathan to induct hybrid seeds to improve yield and output. In 2021-22 India produced over 316 million tonnes of food grains – an all-time high.

India is also the largest producer of milk in the world at around 200 million tonnes. Again India was a net importer of milk, butter and baby food for a quarter of a century after Independence. This was despite the fact that a successful template, designed by Verghese Kurien who set up Amul, was available for India to adopt. For two decades, despite the support of three prime ministers, the system blocked funding and stalled the idea of a national grid for milk production. Kurien doggedly persisted and finally in 1970 leveraged aid from FAO-WFP to design Operation Flood.

In 1964, after the debacle of the war with China, Jawaharlal Nehru asked Homi Bhabha to head a commission to examine India’s competitiveness in inducting technology. The Bhabha Committee concluded that India had great potential in hardware and software. India missed the hardware bus and almost missed the software bus too.

India’s software sector was denied the resources – computers, connectivity and cash-dollars – to build enterprises for three decades. Nagaraj Vittal, then Secretary, Department of Electronics, came up with an innovative system – the software technology parks – to get connectivity for the software sector. The idea faced resistance from the usual suspects but the magnitude of the 1991 BoP crisis propelled systemic change and the software sector has not looked back since. In 2022, software companies employ over 5 million and are among the largest employers and software exports set a new record earning over $254 billion.

Crises have also played a role in ending decade-long debates on opening up the economy, and on policies ranging from FDI to privatisation. Sectoral caps in FDI were relaxed – in 1992 after the BoP crisis, in 1997 after the Asian Contagion, in 2002 after the Pokhran sanctions and more recently to address the twin deficits problems.

In privatisation, sectors once deemed strategic have been opened up as India found itself on the brink of rating action or was faced with a rising fiscal deficit and debt. The sale of Air India and the fact that banks and refineries are on the sell list validates the reality of crisis-driven migration of policy.

Crisis As An Enabler

Often the induction of technology to enable equity and efficiency has required the force of crises – and a bit of serendipity.

Not long back accessing services meant carrying multiple documents, tedious verifications and frustrating delays. Aadhaar changed much of that. Aadhaar arrived at the intersection of political urge, rising subsidies and flailing governance. The power of the idea of a biometric identification system to ensure benefits reached intended beneficiaries though did not translate into an easy ride. Aadhaar faced civil resistance, intense judicial scrutiny and political pressures.

In the run-up to the 2014 polls the BJP vowed to dismantle it and Narendra Modi, then PM candidate questioned the mechanism. The fuel price crisis, with crude oil prices hovering over $120, and the promise of efficiency enabled the adoption and its expansion later via legislation. The utility of Aadhaar to expand financial inclusion and deliver targeted benefits in welfare, subsidies and pandemic relief to millions is now a cause for appreciation and celebration.

The Unified Payments Interface is now ubiquitous – enabling e-payments in the gig economy, in e-commerce, in Kirana stores or the local vegetable vendor. The rapid expansion of QR Code payments or online subscription of bonds or banking has changed the face of the economy with over 5 billion transactions worth over Rs 10 lakh crore. Again the adoption and expansion of digital payments could not have been so rapid if it was not for the crippling effect of demonetisation and the crisis caused by the Covid-19 pandemic.

The Silent Crises

Not every crisis translates into change. There are some crises which stay silent. This is both a reflection of systemic sloth and political impunity.

India’s primary education system is broken and is visible in the assessment published by the annual reports of ASER. The deficiency of curriculum has aggravated the employability of even those who complete their years in school and college. The public health care system is wracked by inadequacies and incapacity – in both physical infrastructure and the presence of personnel. The distress in India’s farm sector denied forward and backward linkages, access to inputs and markets, is manifest in the rising calls for quota in government jobs and agitations for higher procurement prices. India’s energy security is threatened by politically emboldened free power regimes. The impact is visible in the losses and near bankruptcy of the state electricity boards. Access to water is worsening.

India’s list of silent crises is long. It results in the denial of the most basic of services to citizens. The cause is largely located in systemic dysfunction, in the faultlines of the constitutional mechanism distributing authority and accountability to the centre and states.

The question that India must confront as it turns 75 is why every change must await a crisis.

Shankkar Aiyar, political-economy analyst, is the author of ‘Accidental India - A History of the Nation’s Passage through Crisis and Change, ‘Aadhaar: A Biometric History of India’s 12-Digit Revolution’ and The Gated Republic: India’s Public Policy Failures and Private Solutions.

The views expressed here are those of the author’s and do not necessarily represent the views of BQ Prime or its editorial team.