subject: Elephant on the Move [print this page] Elephant on the Move Elephant on the Move
Once upon a time there was an empire, where the sun never used to set. It controlled half of the globe, and ruled more than half of the humanity. Such an empire had a jewel in its crown called India, the name derived from river Indus. The jewel in the crown later got epitomized literally by Kohinoor diamond, which the queen has in her crown.
1600 A.D. was the year when East India Company was formed to do trading with Indian Sub Continent. That time India had more than 25% of the world's GDP and more than one third of the world's trade. Well, nobody knew about GDP at that point of time. And nobody knew about India also at that time. It was a land of hundreds of independent states having not very cordial relationship with each other. So the Britishers had no problem in conquering the whole land mass within next 150 years. The lack of political unity among different Rajas in India paved way for one of the most notorious economic downfall of any country in recorded time barring China.
Many people do argue that British rule was not all that bad for economy as such. They gave us railways, telegraph, industries etc. But they forget that had India continued its dominance in world trade, these things would have been imported in India anyways. The real face of British rule was felt during early 1940s when whole of Bengal starved in famine, while all the resources were pumped to support the war in Europe. So much so for the mission of civilizing the world.
At the time of independence, India chose to be a close economy. There were two factors which caused this decision. First of all, after the great depression people had lost the confidence in market economy and they swear by the mercantile theory of economics, secondly India had a very low level of confidence in itself. We thought that we won't be able to compete in the world market. Our goods were shabby and our industries were inefficient. Hence, we should cut down from the world trade, build capacities at home and then go the world market. Well, sounds logical. But it is hardly practicable in a democracy having hundreds of registered political parties.
So the government controlled everything in India. It required a license to do anything, and who issued that license, some bureaucrat sitting in Delhi having no knowledge of the subject. But he used to dictate the entrepreneurs, what they could produce; from where they could procure machines and raw materials, how much they could produce and at what price they could sell those products. Therefore, if you had any personal relation with the bureaucrat, you could have the monopoly in the market. Nobody else would get a license to compete you, and you could produce third grade products and could sell them for very high price. The chairman of a well known automobile company remarked "We don't need a marketing department; we just need a despatch department".
When you have monopoly in the market, why do you need to market your products? The poor customer doesn't have any choice but to come to you only, and is ready to pay whatever price you want. Hindustan Motors and Toyota Motors started functioning in the same year. Today Toyota produces more than 10 million vehicles, does anybody knows about Hindustan Motors?
This was the state of our economy which suddenly came to end in 1991. When you are pushed to the wall, the only way you can move is forward, no matter how much is the resistance. The government had forex reserve to finance the imports for next 15 days. Requests for bail out had been turned down by IMF unless government promised something totally different, totally out of the box. We had no other option but to change. All the political and economical beliefs of past 45 years came to end in July 1991.
The turbanator opened the Indian economy by dictat. Overnight, import duties were cut to minimum level, license requirements were gone, foreign capital was welcomed in. Opposition cried foul, it was projected as a sell off, as if the government had sold off the entire country to the bunch of capitalists. Everybody was sceptical that whether this gamble would pay off?
Today after almost twenty years of LPG (Liberalization, Privatization, Globalization), do we see any difference in India's economy as such. The answer is YES.
The difference can be seen both in numbers as well as the attitude of outside world towards India. Till early 90's India was perceived to be "A third world country of snake charmers". BRIC report of Goldman Sachs was published in 2005, and suddenly people realised that one billion people are there, working day and night asking or rather demanding their fair share in the world's prosperity. Billion minds are just not ready to accept that they are less capable of doing anything, or they are less deserving than anybody else.
Today when the entire globe is working to come out of the recession, no one can doubt that India has an important role to play. Indian economy, which was on the verge of collapse 20 years back is today 4th largest in the world on PPP basis.
The elephant has finally woken up. It took its own time to get up, but now it has started moving. And when elephant is on move, no one messes up with him.
