Indias second Independence
Date: Saturday , June 28, 2008
While India’s political freedom is 60 years old, its economic freedom is only 16 years old. It took birth in 1991, when the government abandoned the planned economy model manifested in what was labeled as the “license Raj” in favor of free market economy. What has been achieved in such a short span of 16 years is impressive.
First, it has become one of the fastest growing economies in the world (8-9% annually with low to moderate inflation) compared to the Hindu rate of growth (2% or less) since its second independence.
re than U.S. $300 bn in reserves through export growth especially in services sectors such as IT and ITES as well as by attracting all types of investments (stock market, private equity, and foreign direct investment) into India. This is destined to cross U.S. $500 bn within the next two to three years.
Third, India’s stock market has performed extremely well creating significant wealth for all types of investors including main street citizens through mutual funds, foreign institutional investors (FII), and especially for entrepreneurs and promoters.
Fourth, it has also produced several large new enterprises such as Reliance, Infosys, and Bharti and re-energized traditional business houses like Tata, Birla, and even many public sector units (PSUs) including ONGC, Maruti, SBI, and LIC. The combined market caps of these enterprises since 1991 is nothing short of spectacular. Finally, India’s economy has been increasingly and steadily getting globally integrated both economically and politically.
Impact of second Independence
So what has been the impact of this spectacular transformation of India’s economy? First and foremost, it has created a new Image of India: India’s image worldwide has dramatically changed from a country of roaming cows and snake charmers to one of an emerging superpower with talented people in all walks of life from contemporary literature and art, to science, engineering, business, and finance. Second, it has also generated a new self confidence and “can do” attitude among its educated class and entrepreneurs. In fact, nothing seems to be impossible if you are an Indian or in India. Third, it has produced altogether new entrepreneurs such as Mittal, DLF, Reliance, Bharti, Dr. Reddy’s, Ranbaxy, Infosys, and many more.
Finally, it has also created a new middle class; I call it the call center couples: both husband and wife are college educated, both have to work, and neither wants their parents to live with them because they like and enjoy their privacy and freedom. The call center couples do not like the traditional merchant or the neighborhood provision store owner who home delivers daily groceries and toiletries with a monthly account settlement. Instead, they want to shop at a modern organized retailer such as Big Bazaar and Metro, which offer branded, quality products (both domestic and imported) with fixed prices and check out at cash registers that accept credit cards for payment.
India in 2035
Where will India be in 2035? Here are some predictions based on accelerated projections of past impressive record. First, some of the largest global enterprises will be of Indian origin especially in basic industries such as copper, steel, aluminum, and other industrial materials. India Inc will transform into a truly global enterprise not through exports but through large global acquisitions of world class companies with strong technical, manufacturing, or branding assets. Recent acquisitions by Mittal, Hindalco, Tata (across many of its companies), Wipro, Marico, Crompton & Greaves, Ranbaxy, Dr. Reddy’s Labs, and many others will be replicated by Reliance Industries, ONGC, private sector banks such as ICICI Bank, as well as by many public sector units.
Second, India will become the second (and in some instances the first) largest consumer market for many products and services surpassing the United States, Japan, and Germany. This will include mobile phones, consumer electronics, appliances, garments, motorcycles, scooters, beverages, prepared foods, and agricultural products such as fruits, vegetables, and grains as well as dairy products including milk, cheese, and butter. As the second largest market in the world, it will attract global enterprises from around the world to manufacture and market locally. This will also be true of global IT industry including IBM, Accenture, Microsoft, Cisco Systems, and Intel.
Third, India will partner with strange bedfellows in search of industrial, agricultural, energy, and talent resources around the world. Think of its investment and business partnering with Bolivia, Venezuela, Iran, Malaysia, Kazakhstan, Myanmar, Egypt, and several resource rich African countries. In other words, India’s global alignment will be less on ideology (like the non-alignment movement) and more on markets and resources, including human resources.
Finally, India will gain significant geopolitical clout by 2035. It will become part of G8 along with China; it will be given a permanent seat at the UN Security Council, and will be asked to provide leadership level talent to world bodies such as the ILO, WHO, World Bank, and IMF.
Indeed, some economic experts and advisors believe that India will catch up with China and will start to outdistance both the U.S. and China like a good marathon runner by 2035. Celebrating the second Independence may be equally important.