Moment of reclamation

On June 23, 1757, a battle was launched at dawn. It was a short battle that concluded before dusk on the same day. The backwash of this battle, however, did not. This was the battle of Plassey. The British forces overwhelmed the soldiery of Siraj-ud-Daulah under the leadership of Robert Clive and cemented an Empire that would administer to India, in the words of American historian Will Durant, “the greatest crime in all history.”

The Raj plagued India. In its dark and dishonourable rule that lasted for nearly two centuries, it ruined India by all measures — politically, culturally and economically. A regime of loot was ushered. The cost of this loot in today’s economic value has been estimated by renowned economist Usha Patnaik to be a ginormous USD 45 trillion. The grotty British rule and its ravages crushed India’s economy. An economy that once commanded a majestic share of the global GDP at 23 per cent was left with a meagre share of 3 per cent.

When India finally won its independence in the August of 1947, after centuries of struggle against inglorious imperialism, Pandit Jawaharlal Nehru launched the nation as a new-born star that had a tryst with destiny.

It was, however, not going to be easy. The birth of India was soaked in the blood of the Partition. Two of its arms were hacked by the partition of India. The partition not only severed from India some economically well-endowed regions — both on the eastern and the western side — but also imposed a serious fiscal burden on the government.

After a brief calm in the 1950s, when the gale was brewing, the 1960s brought with itself an all-encompassing tormentous storm. One crisis followed the other. In this decade, India fought two wars, agricultural production declined forcing it to live a ‘ship-to-mouth’ existence and its foreign exchange reserves plummeted to alarming levels. The 1970s began with another war and the economy turned left, forcing a socialistic pattern of governance, political instabilities, nationalisation of corporations, and an emergency in the republic.

In the 1980s, the economy endeavoured to turn towards reforms and its health began to get better. Rapid industrialisation became the call. The growth rates were encouraging. The sun was, however, still not shining on India. The dark clouds of financial imbalance continued to loom. The current account deficit continued to soar in alliance with the total external debt which had trebled in the last ten years, setting the stage for a full-blown balance-of-payment crisis with the onset of the 1990s. This was the greatest economic crisis India had to face since its Independence. The credit rating agency Moody published a damning report in furtherance of its position to downgrade India, stating that ‘India is unable to finance its external imbalance’, and dubbed it politically unstable. In July of 1991, the Reserve Bank of India had to pledge 46.91 tonnes of gold with the Bank of Japan and the Bank of England to raise a loan of USD 405 million to save the economy from a possible bankruptcy.

This crisis hurt India’s reputation and India’s pride. The response, therefore, couldn’t be ordinary. It was the turn for an idea whose time had come and the emergence of a hero: Manmohan Singh. Singh opened his historic budget in India’s Parliament with a quote by Victor Hugo and followed it by opening the Indian economy. The Indian economy had found its breath for which it was long left gasping. The reforms instituted measures to widen not India’s deficits, but its arms for the world. The economy endeavoured to become global and liberal, and privatisation was no longer a sin.

1991 laid the groundwork for an economy that could someday reclaim its lost glory. It unencumbered the chains fastened to the economy by unthoughtful policies and unfortunate tragedies. India started registering higher economic growth translating into higher per-capita income. Its sectoral outputs improved and so did the share of foreign trade in its national income.

The reforms were so successful that the size of India’s economy has multiplied over 11 folds since 1991. It was USD 266 billion in 1991 and is today over USD 3 trillion. This was the best medicine that Manmohan Singh could administer and that the Indian economy could wish for. This was the original India-Stack — liberalisation, privatisation, globalisation.

Fast forward to 30 years, India is now the fifth largest economy in the world. And, destined to be one of the leaders of this age. A fort is now being built on the foundation that was laid in 1991. The game has begun.

In this leg, India has a new player in the team. A new entry in the mix of sets: the Internet — the India Stack 2.0. When it comes to physical infrastructure, India may still be playing the catch-up game with the developed countries and China, but in the digital world, India is demonstrating the incredible. India’s digital public infrastructure on the foundation of the Aadhar at the bottom, additional layers of payment interfaces, and sophisticated Application Programming Interfaces (APIs) primed towards achieving distinct delivery mechanisms is a game-changer. India is already the world leader in real-time financial transactions in the world — three times more than that of China.

India’s working-age population is still increasing in size. This implies a longer runway for growth. Perhaps even longer than China’s. The rate of formalisation of the economy is going to accelerate and so will productivity. The capital expenditure cycle is showing signs of revival. India, today, has a strong financial sector that is well-capitalised to finance its needs.

After decades of crisis and hurt — our stars are getting aligned. Today, we have the energy. We have the platform. We have the people. India looks ready to enter a new era of transformation. An era where a nation that once didn’t merit a mention has become the talk of every influential town in the world.

India, today, is an excellent case of confluence between network effect and compounding. It took India three decades after 1991 to add USD 3 trillion, the next USD 3 trillion could come in only 7 years. This is a sight that nobody in the world can ignore. We are only a couple of years away from becoming the third-largest economy.

The timing of our setting up the stage to surge fuels the interest of the world all the way, more since China is slowing down for good. It’s predicted that China may not see a growth of 3 per cent again — at least in the next decade. Add to that the instability in policies and an unannounced consensus amongst fund managers across the world that China is becoming un-investible. The debt that China will have to inject to fuel every percentage of its growth will now look even more drowned in a sea of reckless risks.

The world is today starved for growth. It’s looking at India. Hopes are pinned onto us. This is our time to deliver. This is our time to rise. This is our time to be the bright spot that we have always wanted to be. This is our time to shine.

The writer is a Chartered Accountant, law graduate and an alumnus of IIM-Ahmedabad. Views expressed are personal