India Celebrates 70 Years of Independence

India celebrates its 70th year of Independence on 15 August. Partition of the Indian sub-continent in 1947 into mainly Hindu India and mainly Muslim Pakistan caused great upheaval and severe dislocation for about 12 million people, and loss of over a million lives. 70 years may well seem a long time in terms of human life. But, in the journey of a nation it is not very long. Today India is still young, despite its ancient culture. It has grown to be a confident, energetic and boisterous democracy. The choice by India in 1947 to follow the path of democracy, rather than communism, has created a sustainable path for the future. The socialist policies adopted 70 years ago were appropriate at that time, and served their purpose. But, in our view, these socialist policies introduced by the first Prime Minister, Jawaharlal Nehru, continued for more decades than needed, aided by his dynastic family in power. The continuing left-leaning socialist policies resulted in stultifying progressive thinking, inefficiencies, increased bureaucracy and corruption, and created the “license raj” for much longer than anticipated. It also made the government less of an “enabler” to allow industry and business to get on with its job: to help grow the economy, create jobs, give consumers wide choice and to create wealth.  

The low economic growth of just around 3½ per annum for three decades from 1950-1980 started to reverse after the first phase of economic reforms were introduced in the 1980s. The second and more major economic reforms from 1991 started a journey of economic acceleration. The period 2004-2008 saw economic growth spurting to an average 8%+ per annum. The global financial crisis in 2008 had less of a shock for the Indian economy than on western and developed countries with more open economies and policies. Simply because India’s less open economy luckily provided a valuable shield for its banking system against transmission of global financial risk. For example, the Indian banking system suffered less than 1% loss, mainly through its few branches abroad, due to the global banking crisis. The sweeping victory which propelled Narendra Modi and his party, the BJP, to power in 2014 ushered in hope for better governance, far reduced corruption and bureaucracy and strong economic reforms to push economic growth higher, especially to boost jobs. Modi has not quite been able to deliver results to people’s lofty expectation; but hopes persist with many that he is probably the best man to lead India ahead.

Economic and social indicators today are much better than 70 years ago. However, the pace of progress over seven decades of independence seems frustratingly slow for many Indians, and not broad-based enough. The cost of democracy to India continues where consensus opinion takes time, but is more sustainable in the long term. The Indian stock market has rewarded investors with higher returns (SENSEX up about 18% per annum over the last 30 years) than most western and developed countries. India has more billionaires in Asia in 2017 than any other country, except China. And yet sadly has over 400 million on under $ 2 a day as the fruits of faster economic growth have not been shared by the wider population, especially in the rural areas. For the last 25 years that the author has specialised in the economy and investments there, India has been a place of three steps forward and one and a half steps backward. Still, in 25 years the author has never been more optimistic for the decade ahead. Despite future challenges  and the journey ahead inevitably being filled with bumps, it is felt with optimism that the best is yet to come for India.