The unrest, which attracted the support of Rihanna and Greta Thunberg, peaked when farmers stormed New Delhi’s Red Fort and drove tractors through police roadblocks, meaning a complex patchwork of subsidies and price supports – which economists fear the government is unable to afford – must be scraped together. Let’s sit together.
It is India’s unprecedented drive to digitize its economy that holds the most promise. QR codes adorn even the humblest food stalls. Anyone with a phone, which is the majority of the population, can make and take payments with the click of a button. At the heart of this effort is the “India Stack” — government-backed application programming interfaces, or APIs, on which third parties can build software with access to government IDs and payment networks.
“We wanted to create something relevant to India rather than copy and paste solutions from other countries,” says Ritesh Shukla, CEO of NPCI International Payments, which built and operates the country’s unified payments system.
He argues that real-time digital payments in India have made the country’s welfare system more efficient, reduced corruption and should facilitate migration to India’s cities by making it easier for people to earn a living where they already are. Over time, they could also make it cheaper for Indian expatriates to send money home.
Innovative fintech companies like PayTM have already begun offering microloans to small businesses on the back of their transaction histories – providing credit to large segments of the population who until recently did not have bank accounts.
Much of Modi’s first term focused on rolling out welfare schemes such as ensuring the entire country had bank accounts into which interest could be paid, subsidized cooking gas, and government-funded construction of toilets. His second term was marked by a truly pro-business agenda. He has been keen to praise wealth creators and has allocated a budget of Rp2 trillion for production-linked incentives designed to boost the country’s capabilities in manufacturing sectors including pharmaceuticals, mobile phones and automobiles.
The once largely inefficient cash-based economy is now being dragged into the twenty-first century at lightning speed. The Indian Prime Minister reduced corporate tax from 35 percent to 25 percent and opened the country to more foreign investment. The nationwide adoption of GST has replaced a dizzying array of local levies.
The government has pledged to privatize the country’s ailing state-owned banks and has managed to sell Air India, something that many feared would be unachievable.
There have also been missteps such as the demonetization program in 2016, which was designed to curb the shadow economy and promote digital payments, but which hit sectors and small businesses that relied on cash.
The government continues to err on the side of protectionist measures, and Modi, like many Indian leaders before him, appears to be chasing the illusory lure of self-sufficiency. Even with partial deglobalization, such a goal will not be achievable for most countries, especially resource-poor ones like India. New Delhi’s import substitution tactics have already resulted in Bangladesh and Vietnam taking the lion’s share of manufacturing activity moving from China.
Raghuram Rajan, former governor of the Reserve Bank of India, is concerned that India’s high levels of unemployment could lead to India wasting its moment in the sun, and feels that the country needs to invest more in “human capital” – that is, education, skills and health. .
The more pessimistic view, expressed by an Indian politician, is that the main blessing that his country enjoys is in fact a curse. “The demographic dividend? What is the demographic dividend?” he asked. “India neither has the land space nor the resources to support a population of 1.4 billion people. It’s not a demographic dividend. “It is a demographic nightmare.”
Rajan warns against being influenced by cyclical fluctuations between pessimism and optimism about India. “We treat our economy like we treat our cricket team – it is either the best thing in the world or the worst thing,” says Rajan. The reality, for both the country’s economic potential and sporting prowess, lies somewhere in between the two extremes.
India certainly has a habit of confusing naysayers. As historian Ramachandra Guha points out, many obituaries were written for the young nation in the years after independence. The pessimists saw India as too mixed up—divided along caste, class, language, and religion—to survive as a nation, too poor to survive as a democracy.
Despite all this, she continued, endured, and grew richer. But if there is one thing more anti-democratic than poverty, it is inequality, as the developed world has discovered in recent years. If India is unable to enact meaningful agricultural reforms, improve health and education standards, and provide jobs to large numbers of its population, the gray economy and welfare system will come under severe pressure to ensure that wealth reaches the neediest.
The near ubiquity of smartphones in India, coupled with the relative cheapness of data, has countless benefits. But it also means there are hundreds of millions of portals through which poor Indians can get a clearer idea of what they are missing out on. Is this part of the reason behind the escalation of social divisions that have recently emerged in violent clashes in Manipur and Haryana? Will the country’s politicians work to address differences, ignore problems, or stir up strife?
The answer will go a long way in determining whether India is able to fulfill its potential in the coming decades. Dr. Subramaniam Jaishankar, India’s External Affairs Minister, adds a touch of nuance to Modi’s slogans. He sums up the Prime Minister’s 2047 target as “a message to the nation that we need to rise up and do something very determined and focused over the next 25 years to be… a developed nation.” “We think we have done a good job in the last decade, but we are very aware of the fact that a lot of work still lies ahead of us,” he adds.
Few countries are as full of problems and promise as Modi’s country. Once again, there are few countries that are accustomed to dealing with their internal contradictions. India’s rise is certainly not inevitable. However, you don’t want to bet against him either.