Economy India

Economic Cost of Indian democracy – 1% economic growth

Democracy in India reduces its overall rate of economic growth by about 1%. Startling as it might sound, it is a good price to pay. International investors as well as companies love to put their money in a non-authoritative regime. This is evident by the fact that although everyone has money in China, they have faith in India. Can we overtake China? Definitely. Is it a distant dream? Not at all. We’re only like 15 years behind China when it comes to the pace of economic reforms. The primary difference is that while China’s reforms are investment centric, India’s reforms are people centric. This is where we pay the price for democracy. Not to mention that China’s workforce is going to reduce by about 50% in the next 30 years, whereas ours will effectively double in the same time period.

India is a land of beliefs, languages, colors, and their associated idiosyncrasies. On one hand we have the pro-divestment, pro-globalization Government in power, while on the other hand we have the left. The Left has its own concerns; concerns which bear their own merit. It is hard to please everyone in a democracy. Indian democracy is corrupt, filthy, inefficient, lethargic, and polluted. But, things still get done. We are still the world’s second fastest growing economy, and at conservative counts, are growing at the rate of about 8% per annum.

I have made a brief, albeit slightly educated post on India’s economic growth before. Experts believe that a democracy can never achieve more than a 9-10% economic growth rate at all. I would like to study this verdict in detail, and would certainly talk about it when I do. A very good quote by Gurcharan Das, a prolific writer – “In the case of China, you have a government which is inducing this miracle, in India it is despite the government”. He goes on to say that the Indian economy grows at night, when the Government is asleep.

Why then, does India’s finance minister Dr. Chidambram believe that we don’t pay a price for democracy, rather the lack of it? Of course, he has a very rational view on the whole thing from the perspective of a democracy in India that is actually authoritative at certain granularities; a democracy where some people are still afraid of exercising their fundamental rights. Is it true that a democracy can exist without any ills of its own? Is it possible to be truly democratic? Is it possible to have a democracy where everyone is happy?

What changes the equation when we consider the economic synergies created between India and the developed, industrialized west? Why does the newly awake America love India so much? It is a fact that Indians rank second in their liking for America after Americans! Whereas 83% of Americans like America’s ways, about 71% Indians endorse it, according to an article in the latest Newsweek. Who wouldn’t want to do business with a country that likes their way of doing business?

Things are changing, and I am happy that we paid, and continue to keep paying the price for maintaining the world’s largest democracy. Post-colonial India has evolved. We have changed, and have even been through an authoritative regime, only to see our growth rate slow down further. The world loves us, and we are taking over the world by exporting intelligence and our way of (overcoming obstacles in) life.

In the words of Gurcharan Das – For 3,000 years, we have been working with knowledge that’s basically invisible, so it might just be that our core competence is invisible.

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