India: A Place of Dreams
July 8, 2009
Recently, on an unbearably hot and steamy day walking down a traders lane in Mumbai, I found myself marveling at how much the country has truly transformed. As a first-generation Indian-American, I have been traveling to the country since I was child, and, while I have noticed the obvious economic changes taking place-the beautiful new Bangalore international airport, the glow of television sets in even the most informal dwellings in Mumbai, the sight of cell phones in a remote Rajasthan village where houses are still constructed from cattle dung-I had truly missed the real change until that moment: the growing confidence in Indian society. India had become a place of dreams.
My earliest memory of India was arriving at Mumbai international airport with my parents and getting stopped by customs officials. Like most Indians living abroad, my father would pack suitcases full of items that were difficult for my family to buy in India (or for which the quality in India was bad). On that particular trip, my grandmother had asked for a toaster. The officials inspected the toaster and pulled my father aside to tell him there would be a large customs duty for this “foreign luxury item.”
In those days, people still joked about the “Hindu rate of growth,” a derogatory term used to describe India’s low annual growth rate between the 1950s and 1980s. Indeed, before economic reforms began in 1991, the average annual growth rate stagnated around 3-3.5 percent. The Indian economy was shackled during a period known as the “License Raj,” with its elaborate and cumbersome set of regulations that made it very difficult for entrepreneurs to start and grow businesses. These procedures, coupled with price controls, high tariffs, and restrictive policies on foreign direct investment, crippled the Indian economy for decades. In response, millions of Indians emigrated from India in search of more dynamic economic opportunities. The success of these immigrants abroad as professionals and entrepreneurs in their adopted homelands is well known, and underscored the fact that there wasn’t something about Indian culture that prevented the country from thriving, but rather a set of restrictive policies that held back entrepreneurship, innovation, and productivity.
Today, India bears little resemblance to the India I remember visiting in my childhood. Economic liberalization has freed the Indian economy to achieve growth rates of 5-6 percent annual growth in the 1990s, and upwards of 7 percent in the last decade (with 2006-2008 seeing 9+ percent).
Even in the wake of the current economic crisis, India is doing relatively well because of growing rural demand. More than 60% of Indians are still employed in agriculture. The impact of the global downturn has been muted for many of these Indians to whom credit was seldom extended by banks (but who are now buoying those same banks with their deposits). Analysts believe that a good monsoon season and state aid programs – including a scheme that guarantees poor rural families at least 100 days of employment a year – will support India’s wider economy by putting a few more rupees into the pockets of the country’s rural poor. Indeed, the government recently announced that the 2010 budget will expand such programs to continue bolstering the economy.
These efforts seem to be working. Forecasts from 2009 predict a 5.5 percent annual growth rate. Although this is a sharp deceleration from the nearly 10 percent growth a few years ago, it still compares favorably to forecast rates of GDP growth in other Asian countries.
Young Indians now have choices that were unknown to their parents. Those with the means may choose to emigrate for education or work, but it is no longer necessarily seen as the best path to a secure professional future. A secure professional future is possible in India. And those that had previously been barred from economic advancement because of class or social standing are finding that they too can live the “Indian Dream” through an increasing number of opportunities.
To be sure, India still faces many difficult problems. Hundreds of millions of Indians still live in poverty and lack access to basic services. And the country faces an enormous challenge in implementing policies that both encourage growth and ensure equity for all of India’s people. But walking down that hot, crowded, and busy lane in Mumbai, I was filled with a sense of enormous possibility for the country despite its problems. As farmers and traders busily sold their goods, I wondered how India would change in the next 20 years and how people’s lives would improve because of it. As I walked down the lane, I noticed a man coming out of a small appliance shop. He was carrying a bright, shiny toaster. I smiled.
Nina Merchant is The Asia Foundation’s Assistant Director of Economic Programs. She can be reached at [email protected].
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