MORAL FAILURES: THERE ARE NO MAGIC BULLETS FOR INDIA’S ECONOMIC CRISIS
Ashoka Mody
IN THE DOCUMENTARY The Fog of War, the former US defence secretary Robert McNamara says that if the Americans had lost the Second World War, they—especially, he—would have been prosecuted as a war criminal for fire-bombing Tokyo. His message was that the victor sets the rules and writes the narrative. Today, Indian and international elites, refusing to confront the economic and moral crisis India faces, have established a dominant narrative of a rising India poised to make generational leaps with the power of digital transformation.
In betting on an Indian decade, even an Indian century, commentators are playing a high-stakes game with house money, at no risk to themselves. The risk falls on hundreds of millions of Indians trapped in distressed agriculture or in the pool of unemployed, underemployed and poorly-paid urban workers. The pursuit of magic bullets leaves the fundamental tasks of economic development dangerously undone.
To understand the hazards that India faces, consider the two development paths taken following the Second World War. East Asian nations followed Japan’s pre-war example. They invested heavily in human capital, including in mass education and health, in the inclusion of more women into the workforce and in labour-intensive manufactured exports. They experimented with high-risk industrial policy, but never lost sight of the core goals of human development and job creation. As a result, they created economies that were, at the same time, egalitarian and rapidly growing. The overwhelming international evidence is that an economic strategy that promotes a fair sharing of the pie also enlarges the pie rapidly.
Latin American countries followed the other development approach, one that gave low priority to human capital and labour-intensive manufacturing. Brazil is the poster child for this strategy. From early in the post-war years, its growth came to depend on finance and real estate. Agribusiness and export of commodities created a large source of foreign exchange, which bid up the price of the Brazilian currency. This, in turn, undercut the potential of labour-intensive manufactured exports. And, as labour congregated in the informal sector to provide low-end goods and services, the country found itself burdened by a gargantuan and stubbornly persistent inequality, which remained immune to redistribution efforts even under the left-leaning president Luiz Inácio Lula da Silva. Brazil bifurcated into two countries. The elites, in their gated communities, had little interest in policies to foster equal opportunity. Citizens in the other Brazil came to rely on precarious jobs, struggled with poverty and were often compelled to pursue criminal careers. New technologies—WhatsApp and e-commerce—blended into the favelas and open sewers of vulnerable Brazilians.
Amartya Sen warned in 1997 that the failure to invest in basic education would send India on “Brazil’s way” rather than on the path taken by South Korea. India has done just that, resembling Brazil in many ways, including its large reliance on finance and real estate, informality in petty manufacturing, trade and transport on a much larger scale, and a widening circle of criminal opportunities and careers. India faces additional challenges. Agricultural distress bears down on a much larger share of Indians, and urban growth provides too few jobs to absorb the steady influx of young job aspirants. India’s future, like Brazil’s, seems destined to remain “endlessly frustrated.”
THE INTERNATIONAL MONETARY FUND forecasts that India’s GDP will increase by six percent this year and about seven percent next year. These forecasts are the basis for much of the euphoria on Indian prospects. Even if they prove right, it is absurd to extrapolate from two years of growth to a decade, much less a century. The greater absurdity, as I have argued elsewhere, is taking IMF forecasts seriously. The IMF consistently overpredicts the pace of recovery from crises, never seeming to learn from past errors.
In fact, as a careful reading of the data shows, India’s short- and medium-term outlook is perilous. More so than in other economies, India’s economy yo-yoed in the three calendar years from 2020 to 2022. It suffered a sharp decline after the first COVID-19 wave, then recovered some ground before falling a second time. The second rebound—a dead-cat bounce, in the unkind terminology of economic forecasters—brought GDP modestly above pre-pandemic levels. Over the three years since the onset of the pandemic, India’s feeble annualised growth rate was less than 3.5 percent, about the same as in the year preceding the COVID-19 crisis.
Based on this recent history, the most reliable predictor of India’s GDP growth is an annual rate of 3.5 percent. Forecasters who anticipate higher rates improperly extrapolate from the dead-cat bounce after the second COVID-19 contraction. That bounce waned in the second half of 2022, and the weakness—especially in household consumption—has persisted. Describing India as booming is wishful thinking and bad economics.
India’s low growth rate since 2019 should be regarded as the new normal—the high growth spells between 1993 and 2018 were unusual and is unlikely to be repeated. India benefitted from buoyant growth in world trade, particularly between 1999 and 2008. Also, starting in the late 1980s, GDP growth relied on a bubble in the finance and construction sectors. Such growth was unsustainable. It ended in 2018 when the state-funded Infrastructure Leasing and Financial Services collapsed in a tangle of its misdeeds.
The irony is that manufacturing contributed very little to India’s post-liberalisation growth. Recall that the reforms—the necessary undoing of controls on imports and industrial production—first under Rajiv Gandhi in 1984–85 and more vigorously under PV Narasimha Rao and Manmohan Singh between 1991 and 1993, were intended principally to spur manufacturing growth. Yet, the share of manufacturing fell slightly, from its peak in the late 1980s. Stated baldly, liberalisation failed.
Severe poverty declined from the mid-1980s until 2012, as workers trickled out of agriculture into somewhat higher-earning but precarious jobs in construction and low-end services. Poor job creation after this period showed up as increased severe poverty and more precarity in a 2017–18 survey—which the government inexplicably rejected. Poverty and precarity increased again during the COVID-19 years.
AS EVERY SENSIBLE economist knows, the removal of controls mainly reallocates production across sectors to increase the efficient use of available resources. That increased efficiency manifests for a few years as higher GDP growth. But liberalisation does not promote long-term growth, which requires investment in mass education, public health, and other public goods, especially well-functioning cities and a working judicial system. Adam Smith, the revered free-market economist, understood well the crucial role of public goods. He emphasised in the late eighteenth century that even those in the “lowest occupations” must acquire “the essential parts of education … to read, write, and account.” Since Smith’s time, the standard of essential minimum education has risen. Smith dwelt even more forcefully on the crucial importance of a sound judicial system.
Liberalisation by itself has not spurred manufacturing anywhere. Brazil, too, is stuck with a low share of manufacturing in GDP, handicapped—as is India—by an overvalued exchange rate and inability to withstand China’s manufacturing prowess.
But, worse, liberalisation in India, as elsewhere, encouraged a lazy reliance on the magic of the marketplace. Unaccompanied by proper regulation and necessary public goods, it paved the way for those with power and wealth to get ahead. Unequal development was a moral failure that also undermined long-term growth.
In highly unequal economies, finance and real estate become the central economic drivers. In India and Brazil, they contribute more than a fifth of the GDP, putting both countries slightly above the heavily financialised and highly unequal United States. Finance and real estate can make some individuals fabulously wealthy but these sectors can only support, not lead, the development process. As the economist Joan Robinson remarked, “Finance follows growth.”
More troublingly, finance and real estate accelerate moral degeneration, as India unhappily illustrates. India’s largely unregulated financial sector became rife with corruption in public-sector banks and jugglery of funds and accounts in significant parts of the rapidly growing private financial system. IL&FS, because of its presumed public–private status, embodied the worst of both worlds. Elite Indians celebrated the moral degeneration because it created an illusion of growth and pumped up demand. But, once the bubble fizzled, the demand weakness became evident. Today, despite plentiful funds—from banks and digital platforms, the so-called FinTech sector—companies are reluctant to invest, a telling indicator that weak demand continues to dim growth prospects.
Another manifestation of unequal development and low growth potential is the increasing concentration of assets and sales in the hands of dominant firms. Viral Acharya, a former deputy governor of the Reserve Bank of India, has documented increased concentration in virtually every economic sector over the last decade. Acharya notes that the “big five” business groups—Reliance, Tata, Aditya Birla, Adani and Bharti Telecom—have become dominant in several areas by buying firms rather than by investing in new capacity. That has allowed them to raise prices in captive domestic markets rather than increase sales—the notable exception being the aggressive, even predatory, pricing by the telecom operator Reliance Jio. The insular behaviour of India’s big five contrasts with that of the South Korean chaebol and the Japanese keiretsu, conglomerate groups that built their fortunes as innovative and ferociously competitive players in international markets.
India’s top conglomerates seem unwilling or unable to confront international competitors and have responded to weak domestic demand by charging high prices to captive customers. In turn, the reasons for weak demand lie in agricultural distress and the paucity of urban jobs.
THE HOOPLA ABOUT INDIA’S future ignores the slow implosion of Indian agriculture. First, some key numbers. In 2022, India had a little over a billion people in the working-age group, 15 years or older. Of these, 53 percent, about 560 million people, were in the workforce: they were employed, often underemployed, in some form. Just over 250 million of these workers were in agriculture, up from 205 million in 2019.
An unhappy tale emerges. Agriculture absorbed 45 million additional people—more than half the increase in India’s workforce—after the COVID-19 pandemic began. Some of the increased agricultural workers were women, who had earlier stated that they did mainly household chores but, post-COVID, reported themselves as unpaid household farm workers. The rest were individuals who returned from precarious urban jobs. Amid the narrative of digital transformation, workers crowded into the country’s lowest productivity and lowest earning sector, which employs over forty percent of the workforce and produces less than fifteen percent of the GDP. Key to agriculture’s low productivity is vast underemployment: members of many farm families share the work of a single person. Even casual labourers, who work for others for a wage, suffer stretches of downtime without work.
More people have crowded into agriculture even as farms are becoming smaller. In 1970–71, the operational holdings of half of all Indian farms were less than one hectare in size—marginal holdings, in official terminology. By 2015–16, the last year in which the government conducted an agricultural census, 68 percent of farms were marginal. Marginalisation is the consequence of pressure on land as successive generations divide their farms among family members who cannot find adequate income-earning opportunities outside agriculture. At the current pace of subdivision, by 2047, a century after independence, over ninety percent of Indian farms will be marginal.
Gone also is the romantic notion that small farms are more productive than larger ones. A recent study shows that the per-hectare yield on a ten-hectare farm is forty percent greater than on a one-hectare farm, and it is farms one-hectare or smaller that are increasing in numbers. While it is true that Indian farms—helped by the spread of irrigation, better seeds and greater fertiliser use—are more productive today than they were a few decades ago, they are much less productive than in other parts of Asia.
India’s land productivity did not rise faster because irrigation did not spread quickly enough: the area irrigated by canals today is about the same as it was in 1990–91. Moral failures compounded technical problems. Canal irrigation, as all government-sponsored irrigation, has been plagued for decades by rampant stealing of water, poor use, iniquitous distribution and corruption in construction and maintenance. Meanwhile, increased groundwater irrigation has set up a looming catastrophe.
Although experts warned often that groundwater was depleting quickly, the legal framework and perverse social norms encouraged what the former Planning Commission member A Vaidyanathan described as the “competitive deepening of wells and installation of more powerful pumps to extract water from a falling groundwater table.” A recent study in the journal Science Advances concludes that Indian groundwater levels may have fallen so low that maintaining current levels of agricultural output may prove impossible. Farmer suicides are the most heartbreaking symbols of this stress, not only in the dry regions of Maharashtra, Karnataka and Andhra Pradesh but also in Punjab, where the powerful wells of rich farmers have dramatically lowered water tables. Meanwhile, the climate crisis, with successive drought years and episodic heavy rains at harvesting time, is increasing hardship throughout the country.
The three farm bills introduced in September 2020—touted as breakthrough reforms—had little relevance for agriculture’s central needs: better soil management and water use. The effort in those bills to integrate agricultural production with agribusiness also ignored the reality that displaced farmers have limited options in the non-agricultural sector. The laws were repealed, a year later, after large-scale farmer protests. Now, as agricultural distress grows, policymakers look the other way.
The unfortunate truth is that the Indian economy offers few honourable job opportunities, the type that permit a life of some dignity in either agriculture or in urban areas. Desperate job seekers form an unlimited labour pool that businesses and elite households exploit in a modern manor–serf relationship. This human tragedy manifests, from a macroeconomic perspective, as constrained purchasing power.
THE SEVERITY OF INDIA’S employment shortfall is best measured by its “surplus labour,” a concept much broader than the “unemployment rate.” Quite simply, most Indians cannot afford to stop working. Instead, not just in agriculture but throughout the economy, multiple people, often within an extended family, share the work of one person. These work-sharers have long been India’s underemployed. India’s first employment survey, conducted in 1955, showed an unemployment rate of one percent but found that another fifteen percent could stop “working” without any reduction in economic activity. India’s “effective unemployment rate”—its surplus labour—was, therefore, sixteen percent of the 170 million labour force. The surplus labour was certainly larger. While the underemployed told enumerators they wanted work, many had lost all hope of work and dropped out of the labour statistics. They, too, were exemplars of the economy’s unproductive, indeed unused, labour force.
Just before the COVID-19 scourge struck, the unemployment rate had risen to six percent and the underemployment rate was ten percent, resulting in an effective unemployment rate of 16 percent of the now nearly five hundred million people in the labour force. Discouraged by the perennial lack of jobs, an increasing fraction of the working-age population—mainly, but not only, women—had stopped reporting they were available for work and dropped out of the labour force.
COVID-19 wiped out tens of millions of jobs. Many who lost jobs, and some who earlier said they were not looking for work, declared themselves “self-employed,” the most severe form of underemployment, often just a label to earn self-respect. Around 310 million workers described themselves as self-employed in 2021–22, which was 60 million more than in 2018–19. Of these newly self-employed, a stunning 35 million were unpaid “household helpers” in family-run farms and non-farm businesses. Unpaid for their services, these quintessentially surplus workers surged exactly when the world celebrated Indian unicorns and electronic payments transactions.
Even those who work long, unforgiving hours are engaged in low-wage, low-productivity tasks with virtually no job security or benefits. Throughout India’s postcolonial history, only about ten percent of workers have received a regular monthly or weekly wage with at least one social-security benefit.
The problem is straightforward. The bulk of jobs offered by Indian businesses pay pitiful wages under harsh working conditions. For most Indians, a government job, with its regular pay and good benefits, remains the dream. But, whether in schools, the police, the judiciary, the railways or the bureaucracy, the government keeps large numbers of vacancies unfilled, pushing hundreds of aspirants to compete for one elusive job in unpredictable, often corrupt, recruiting processes.
Not surprisingly, average real wages have barely increased in the past decade or so. In many regions, real wages have declined in the past decade. Indeed, wages and work conditions are inhuman in many professions. At the Azadpur mandi in Delhi, some workers earn as little as 150 to 250 rupees a day, as against the minimum wage of Rs 660. Sugarcane workers, the journalist Kavitha Iyer writes, are in a system “akin to debt bondage,” receiving an advance at the start of the season that they must repay with their labour. During their long work hours, they have frequent accidents and face climate-related health risks, which trigger large healthcare expenses and lost wages. Even lower on the totem pole are those who work in the “hell fires” of brick kilns. The climate crisis has made their lives more hellish during heatwaves, while heavy rains strand them without work and income. To those anxiously seeking support from rural employment guarantee programmes, the government unconscionably delays wage payments while suppressing their recurrent protests.
Unlike in successful East Asian countries, India’s small and uncompetitive manufacturing sector does not create enough demand for labour. Manufacturing forms about fourteen percent of Indian GDP, according to the World Bank—Indian sources estimate the share as seventeen percent—compared to over a quarter in China and Vietnam. India commands less than a two-percent global share of manufactured exports. And, as its economy has slowed after the post-COVID rebound, the manufacturing sector has barely grown.
Yet it is through exports of labour-intensive manufactured products that Taiwan, South Korea, China and now Vietnam came to employ their job aspirants. India, with its 1.4 billion people, exports about the same value of manufactured goods as Vietnam does with 100 million people—and Vietnam is poised to race ahead.
India’s most dynamic sector in GDP terms—finance and real estate—employs trivially small numbers of people. Manufacturing employs only 11.6 percent of the workforce, pushing job seekers into low-productivity sectors such as construction and “trade, hotels, and restaurants,” which each employ more workers. Together, they employ almost a quarter of the workforce.
Nevertheless, the elite narrative says that India stands at the cusp of greatness. This narrative relies on the popular “peak China” thesis—the idea that China’s time has come and gone. As evidence, Apple contractors have made initial investments to assemble high-end iPhones in India, leading to speculation that a move away from China by smartphone manufacturers will benefit India, despite the country’s considerable problems with quality control and logistics. While such a happy outcome is possible, the evidence scarcely supports the prognosis. The economist Gordon Hanson observes that Chinese manufacturers are moving labour-intensive manufacturing from the country’s expensive coastal hubs to the less developed—and lower-cost—interior. Interior China is probably the world’s fastest-growing emerging market.
Investors moving out of China have gone mainly to Vietnam and other countries in Southeast Asia, which, along with China, are members of the Regional Comprehensive Economic Partnership. RCEP countries offer each other low, even zero, tariffs, which gives their firms competitive entry into the region’s supply chains. India has stayed out of this trade bloc because its manufacturers fear the Asian competitors who will gain low-tariff access to the Indian market. As for US producers pulling away from China, many are “near-shoring” operations to Mexico and Central America. Altogether, while some investment from this churn could flow to India, the fact is that inward foreign investment has fallen sharply in the last two years.
A hope persists in the Indian government’s production-linked incentive schemes introduced in early 2021. These schemes offer financial rewards for production and jobs in sectors deemed to be of strategic value. Unfortunately, as the former Reserve Bank of India governor Raghuram Rajan and his co-authors warn, these schemes, like previous sops to manufacturers, are likely to merely fatten corporate profits. They also point out the one apparent success—mobile-phone assembly—is deceptive. Indian companies apparently import a larger value of inputs for a phone than the sale price they receive. This perverse outcome is the result of a subsidy for exports.
As in agriculture, economic policymakers appear clueless on job creation. The political strategy has been to divide the limited number of government jobs through reservations. In August 1990, Prime Minister VP Singh pulled the Mandal commission report out of cold storage, where the two previous prime ministers had let it lie. The report had proposed reserving 27 percent of central government jobs for Other Backward Classes. With 22.5 percent of jobs already reserved in the Constitution for Scheduled Castes and Scheduled Tribes, that meant that 49.5 percent of all jobs would be reserved. Although intended to correct historical injustices, without more jobs, reservations were set to become a political game.
Almost immediately, communities excluded from OBC status began campaigning for inclusion in that group. By 1999, the Delhi government, for example, had designated 54 more communities as OBCs. Inevitably also, the concern arose that some OBC communities were cornering the reservations. In October 2017, the government established a commission under the retired justice G Rohini to sub-categorise OBCs within ten weeks. In December, the commission asked for more time to complete its “voluminous” work. The commission’s work continues after 14 extensions, the last in January 2023.
In the meantime, in January 2019, the government moved to reserve ten percent of its jobs for economically weaker sections among upper castes. Coming on top of the prior reservations, this meant that sixty percent of government jobs would be reserved. In November 2022, the Supreme Court gave this initiative the go-ahead, putting aside its earlier objection to reserving more than half the jobs. This latest expansion entitles the vast majority of citizens to reservations, since only families with gross annual income of Rs 8 lakh or more are ineligible for reservations, the same threshold that excludes the “creamy layer” among the OBCs.
In this dangerous equilibrium, the clamour for jobs grows, and reservations in return for voter loyalty become more attractive for India’s venal politicians. With little choice, people view this pathology as normal. India’s elite, having thus blotted out agriculture and low-skilled urban jobs from their economic policy calculus, hold up the prospect of a technological pot of gold at the end of the rainbow.
VARIOUS PRIME MINISTERS HAVE had their techno visions: dams, steel mills and fertiliser factories for Jawaharlal Nehru; a computer in every classroom for Rajiv Gandhi; and India in the vanguard of robotics, artificial intelligence and other wonders of the Fourth Industrial Revolution for Narendra Modi.
Today, multiple strands contribute to the hope that technology will solve India’s development deficits. The most plausible of these is one by Raghuram Rajan and the economist Rohit Lamba. Their proposition rests on the fact that India’s share of global services exports has risen in the past decade, from three to four percent. India has a small but important presence in the most dynamic segments of world trade in services. These include the telecommunications, computers and software services sector, and “other business services,” such as consulting, research and development, sold worldwide through advanced communications. Rajan and Lamba believe India can broaden out into “finance, medicine, education, and law.”
Although plausible, this strategy is unrealistic. The COVID-induced surge in demand for online services has slowed worldwide. More importantly, India’s broken education system is a huge handicap. While millions of students graduate every year, the numbers employable in high-skill service trade are in the few tens of thousands. They compete with professionals in East Asia, especially from China, Malaysia, Singapore and the Philippines, all countries that have invested for generations in human capital. China, with its world-beating universities in mathematics and computer science, has made big inroads in the export of computer and software services. The Chinese are increasingly more conversant in English. Moreover, there are limits to delivering services online. Online education, for example, cannot substitute for bad classroom teachers. Many international services require demanding regulatory clearances.
And the heroic run of India’s start-up unicorns is ending, along with the tantalising spell cast by the potential of India’s domestic market. That run relied on cheap funding made possible by an extraordinarily easy US monetary policy. Venture capital funds, flush with liquidity, made deals over cups of cappuccino. Those days are gone. A more serious problem is the small domestic market. COVID-19 drew out virtually all potential users, who, according to the best estimates, are at most seventy million people—but more likely fewer than fifty million people. Tucked into that California within India are the consumers of iPhones, Starbucks and Netflix. This group also includes the little over ten million users who order a few times a month from the food delivery service Zomato.
Investors have slashed funding and startup valuations as they have recognised that the domestic market is small and the COVID-era growth in customers will not occur again, for which reason many companies they invested in will never make profits. Particularly hard hit are edtech firms: the valuation of the giant Byju’s—the bellwether of Indian startups—has fallen from $22 billion to $8.4 billion. Indian edtech firms are learning that “star teachers” in distant studios are not an education system—human-to-human interaction is the essence of education. With Byju’s locked in a court battle with international creditors and unable to produce audited accounts for 2021–22, Indian edtech is in crisis. As their valuations have fallen, startups have laid off over twenty thousand employees.
Many policymakers pin their hopes on so-called gig work, a broad category that comprises delivery personnel, Uber and Ola drivers, beauticians, women who prepare home-cooked meals and even the traditional autorickshaw driver. The promise is that, once they are connected to electronic “platforms” or through social media, expanded opportunities will provide for dignified livelihoods. However, for the same reason that startup valuations are falling, the number of gig workers will likely increase much more slowly than the tripling of size in less than a decade anticipated by NITI Aayog, from 7.7 million in 2020–21 to 23.5 million in 2029–30.
And, while some gig work empowers women, gig workers toil gruelling hours. Many, particularly delivery personnel, are victims of frequent accidents and the climate crisis, in equal measure because of heatwaves and heavy rainfall. Their low wages are subject to frequent downgrading communicated as take-it-or-leave-it options through their dreaded apps. The deactivation of the apps can abruptly terminate their essentially zero-hour contracts, and labour codes that promise them social security remain unimplemented. Gig workers struggle to send their children to school and bemoan the virtual absence of upward mobility. They are modern-day sugarcane and brick-kiln labourers, engaged in back-breaking, poorly paid tasks.
A final promise is that technology will revolutionise public services and public administration. This also makes no sense. As with education, crucial to advance in healthcare are teachers to train the next generation of professionals. Technology does not mitigate the chronic shortage of teachers. Under a liberal licensing regime, medical colleges have proliferated; the government has promised a medical college in every district. But colleges with shiny new buildings lack doctors to train new doctors. India’s doctor-to-patient ratio fell from 1.2 per thousand in 1991 to 0.7 in 2020. China’s ratio is 2.4. Decrying the mindless use of technological gimmicks, a recent article in The Ken put it pithily: “Everyone’s building health apps; no one’s adding medical professionals.”
Land administration is another area of mindless technology use. In August 2008, the government announced the Digital India Land Records Modernisation Programme to promote transparent titling and transfer of land. In March 2023, the minister for rural development announced that the digitisation of land records was nearly complete and that the government had begun the “Bhu-Aadhar” programme, in which an Aadhar card would uniquely identify landholdings.
But such digitisation stands ill at ease with the reality of widespread land ownership disputes. Conflicts arise because laws are unclear and administrators do not always follow the law. Conflicts persist because the disputes languish in courts. A quarter of all cases decided by the Supreme Court and two-thirds of all civil suits involve land disputes. The cases drag on for decades. Technology is a dangerous distraction. Effective land administration requires faster resolution of disputes and clarity on the ownership of, and title to, the land. Without such clarity, digitisation can create new conflicts, between paper and digital records.
The bottom line is simple. Economic development requires human capital, the rule of law and a responsive judiciary. Technology does not overcome these development deficits and may even make them worse.
OF ALL FORECASTERS, The Economist has the most reliable track record. Its predictions are bold and unambiguous, and the outcomes are almost always the exact opposite of the prediction. In November 2009, the newspaper’s cover announced “Brazil Takes Off,” along with a picture of the statue of Christ the Redeemer ascending like a rocket. Brazil was set to overtake Britain and France and become the world’s fifth-largest economy soon after 2014.
In June 2013, mass protests—on a scale not seen for a generation—broke out across Brazil. The protesters denounced rising prices, corruption, and poor schools and hospitals. Referring to the football world cup to be held in Brazil the following year, one placard read, “First-world stadiums, third-world schools and hospitals.” In September 2013, the statue of Christ hurtled down to earth on The Economist’s cover. The lead editorial asked, “Has Brazil Blown It?”
Brazil built shiny stadiums for the World Cup and the 2016 Olympics. But, after 2011, its economy barely grew. In 2018, Brazil was in a virtual dead heat with Canada and South Korea for the position of the ninth-largest economy. Today, its education system is an embarrassment, the informal sector remains the largest employer, most Brazilians live one paycheck away from disaster, violent crime is endemic, environmental degradation is rampant and the climate crisis is taking its unforgiving toll.
Indians should worry about The Economist’s May 2022 cover, which declares this is India’s moment. The cover shows the prime minister in a flying buggy vaulting over old, run-down India. The lead editorial heralds “a novel confluence of forces” that stands to transform India’s economy over the next decade: technological leaps, energy transition and geopolitical shifts.
The factors that undermined The Economist’s Brazilian euphoria are working in India with perhaps greater force. India’s education and health services are in much worse shape. Agriculture is threatened by a catastrophic shortage of water. Precarious informal employment is much more widespread. Environmental degradation is despoiling the air, land and water at a frightening pace. The climate crisis is causing recurring heatwaves, extreme rainfall events, coastal erosion and melting glaciers. Sand-mining, drug trade and arms trafficking are increasing the events of violent crime. Crimes against women have increased in the last decade. The share of legislators facing criminal charges has risen without pause at least since 2004, when the recordkeeping began.
Unable to solve its fundamental problems, Indian leaders of all stripes offer handouts to attract voters and promise technological solutions for the country’s economic and moral crisis. But handouts, cynically packaged as “new welfarism,” do not create economic opportunities or give the wherewithal to stand on one’s own feet. As for technology, as in Brazil, WhatsApp and e-commerce, at best, embellish dreary lives. No, there are no magic bullets. Development occurs the old-fashioned way, through hard work in trustful relationships and people acting in good faith. The agenda is long but it is clear, and time is running short.
Ashoka Mody is a visiting professor of International Economic Policy at Princeton University. He has previously worked for the World Bank and the International Monetary Fund. He is the author of EuroTragedy: A Drama in Nine Acts and India is Broken: A People Betrayed, Independence to Today.
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