Last year in February, Rajesh Jain and I had written a note on “Ideas for India.” Following Rajesh’s example, I am reposting the note here, for the record.
India’s economic growth and development poses challenges that are clear but fortunately are solvable. The hard part is not in the figuring out the solutions but in the implementation, and more specifically in the prioritizing and sequencing of the implementation. The elements that require immediate and sustained effort relate to “infrastructural elements” which are few in number but form the absolutely necessary foundation upon which any functioning economy is based. These elements are interrelated in complex ways and if present simultaneously, they enable that emergent multi-dimensional phenomenon we call development. The elements are:
1. Education. Physical capital-both natural and man-made-combined with human capital produces wealth in all its form, from agricultural to manufactures to services. The quality and quantity of educated people strictly determine the economic prosperity of an economy. India needs a radically different education system as the current one is dysfunctional and largely irrelevant in the modern context. Fortunately, this radical re-engineering is possible through the use of powerful tools presented by the revolution in information and communications technologies. To achieve this, institutional reform of the type that encourages private sector participation in education is necessary.
2. Energy. Any economic activity, like all processes in the universe, depends on energy. Today’s developed nations achieved their level of prosperity on cheap fossil fuels, an opportunity not available to India’s billion plus people. Fortunately, India is large enough to be able to leapfrog the fossil fuel stage and invest in renewable energy sources such as solar and wind. Becoming a world leader in the development and use of these energy sources requires a national will that can be articulated by visionary leadership.
3. Urbanization. Urbanization is both a cause and a consequence of economic development. No country has developed without being also largely urban. India’s economic future depends on India’s success at urbanizing its immense rural population. Therefore in the matter of rural development, there is a distinction between the development of rural areas as opposed to the development of rural people. The former is neither necessary nor sufficient for development; the latter is indispensible and can be achieved most effectively by urbanizing them. This requires the development of liveable cities that would absorb hundreds of millions of people who would be engaged in non-agricultural sectors.
4. Transportation. India is a large country with a large population. For the economy to prosper, people and goods have to be efficiently moved fast over large distances. India is approximately ten times as densely populated as the US. It therefore cannot afford the solution that works for the US for transporting people, namely, air travel. What India needs is a land-based system and more specifically a rail-based transportation system for both goods and people. The technology exists for super-efficient, super-fast rail systems. India has to seriously invest in that and replace the century-old current railway system. Further, within cities, India needs to have efficient public transit system and not rely on automobiles.
Note that each of the four elements has dependencies with the others. For instance, the creation of the human capital (education) requires urbanization, which in turn depends on the availability of energy and a good transportation system.