Nandan Nilenkani speaks out

Nandan Nilekani, Business Today, On Friday 14 January 2011, 12:48 PM

When it comes to predicting economic fortunes, what the crystal ball offers us is murky
at best. From the perspective of the global economy, for example, 2010 turns out to be a
sharp contrast of the world ten years ago. The global environment today is as cautious
and conservative as it was economically freewheeling and optimistic in 2000. It serves as
a cautionary tale against interpreting our present mood - economic or otherwise - to
project the future.

Nevertheless, I would say that India finds itself in an enviable position. In the last decade,
it has emerged as a prominent global force, and is predicted to become the fastest
growing economy in the world over the next decade. But it is possible for a country's
promise to go unfulfilled. When we look at economic history, we are often biased
towards countries that successfully leveraged their advantages for rapid growth - such as
China, Japan, much of Western Europe and the United States.

However, several other nations rose for some time and looked set to expand rapidly,
before policy missteps deflated their growth. Brazil and Argentina, for instance, only
recently regained the economic heights they first experienced in the 1970s and early
1990s after falling back sharply into recession. The path to development is a protracted
one, and requires steadiness and responsive policy.

Over the last ten years, India has begun to build the foundation for long-term, inclusive
growth. Industry investment is growing fast. Spending on infrastructure has expanded
considerably, and the cumulative investment in infrastructure between 2007 and 2012
could touch $500 billion. India's telecom revolution has become a means of
empowerment, and created a base for delivering information and remote services to
millions of poor across India. Welfare initiatives have focused on creating an expanded
social security net, and the delivery of critical services - in employment, education and
health - has improved steadily.

Sustaining this progress, however, will require India to respond to the 'Big Four' forces
that are today re-shaping the Indian economy. The first of these forces is India's vast
demographic dividend - its large pool of workers, and low numbers of dependents. These
millions of young people undergird India's growth story, and set us apart from every
other nation - by 2020 the average Indian will be 29 years old, compared to the average
Chinese, who will be 37. In the next ten years alone, we will add 13 million people every
year to our workforce. While the promise of such a young workforce is clear, we must
also have enough jobs for it, as well as the systems to provide the workers with the skills
they need to participate in the economy.

The second great force is India's large domestic economy, which displays deep, untapped
potential - over 600 million people are in the "aspiring" class, who are now just beginning
to see a growth in their incomes and starting to extend their purchasing power. The rise of
such demand, and as a result the continuing expansion of the domestic economy, will be
crucial to buffering India from shifts in the global economy.

The third force is the penetration of information and communication technologies, or

ICT. The rapid spread of telecom connectivity and widespread access to television in
India is one of the most potent changes to have taken place. It makes all the difference
between following existing growth blueprints, and the chance to build an entirely new
one. The government has declared 2010-2020 as the decade of innovation for India, and
ICT will play no small part in this.

The Aadhaar initiative of the Unique Identification Authority of India, or UIDAI,

suggests that governments have recognised the potential of these technologies. As a
universal identity infrastructure, the number could be used to access food, health care and
education entitlements anywhere in India. It could also be used to provide resources
directly to the poor. Such Aadhaar-enabled delivery would be a powerful means of
distributing a variety of services. It would help empower the poorest through stronger
relationships with the State, as well as through establishment of direct channels for
accessing resources and airing grievances.

The fourth force is the rise in mobility. Across the country, thousands of people are
leaving their villages every day to seek a new life in the city. They arrive with little more
than a sack on their shoulders and a willingness to live in miserable conditions and work
small jobs for the chance of better incomes, and a better future for their children.

India's cities, our runaway metropolises, are a metaphor of the opportunities and
challenges the country faces in the next two decades. The Indian city is a place of dreams
and hope for our poor and our migrants, but it is also a place where many have limited
access, few rights and little legitimacy; where a large proportion of people live in illegal
housing, and 70 per cent work in the informal sector.

Such systemic exclusion will have to change. While India has managed to drive growth
through these informal mechanisms for the past few decades, the impact of the four
forces means that this approach is no longer sustainable. Policies and investments will
have to focus on ensuring broader, more inclusive access to formal markets and public
services, and empowering people to exercise their rights and entitlements.
In his book Imagined Communities, Benedict Anderson asserted that nations do not exist
as objective entities. Rather, they "imagine themselves into being". I had iterated this
thought in my book, Imagining India - that a country is shaped by the ideas that dominate
the great majority rather than the governing class. Today, we are seeing India being re-
imagined by people across the country as a highly dynamic, aspirational nation, where
empowerment and access to public services as well as markets are paramount.

Our ability to translate these hopes into reality will determine if our growth arc is a
sustainable one, and if in 2030, we will be able to look back with a sense of
accomplishment.