Someone once famously said, “Behind every politician is a failed economist.” We can show the world that behind every successful politician is a brilliant economist.
Here is a detailed vision for India’s future growth and development and the sort of country it should be, which involves a radical rethinking of India’s politics and economic strategy and is also very different to the vision of the present government.
India should put greater focus on growth through the export of services rather than through export of goods and, at the same time, it must reinforce its credentials as a liberal democracy. 

Our democracy and our economy need course correction. Critical to our economic future is the need to strengthen our liberal democracy and its institutions … if … we allow our liberal democracy to deteriorate into populist majoritarian authoritarianism, it’s not just your economic future that will be jeopardized but our soul as a nation.

It’s the vision of our founding fathers. We ought to find a way of integrating their vision with the character of the sort of country India has become 75 years after independence.

The vision for India comprises both an economic and a political dimension. They are interlinked and intertwined and cannot be separated. Change in one direction is not sufficient. It has to happen in both together.

There are reservations about the recent budget’s thrust on infrastructure development and it’s attempt to replicate the Chinese model of manufacturing export-led growth.

We can  touch upon the problems India has faced in the past in developing its infrastructure, which have not been resolved and are likely to recur again. It may also be true after China’s dominance, the world will be reluctant to accept another China, so to speak. It is important to point out that the Chinese model requires suppression of workers’ wages, which is not just impossible but also undesirable in a democracy like India.

The ‘Atmanirbhar’ model involves subsidies which are discretionary and can lead to favoritism or even crony capitalism.

First, comes the economic dimension. We need to go in an entirely new direction.  The aim is to focus more on export of services than on export of goods. However, we should not forget about manufacturing but rather the thrust should be on boosting export of services. The aim is to leapfrog the manufacturing stage that most countries in the past have gone through and instead go directly to services.

Manufacturing-led growth is harder in democratic countries. This is because it involves suppressing wages and interest rates and also taking away peoples’ land.  Autocratic countries can do this. For instance, China. The East Asian Tigers did this when they were autocratically run. India, a democracy, simply cannot.

On the other hand, on the services side, as a democracy we have a natural advantage.

The pandemic has made it easy to provide high-value added services at a distance.  This is particularly so in areas like consultancy, medicine, legal services, financial technology, travel and tourism.

The question then becomes, can the thrust on export of services rather than on export of goods create the 7-8 million jobs a year that India needs, It sure would be possible as explained here forth.

Whilst accepting that no one has done services-led growth before,  70% of world GDP is services and only 20% is manufacturing. That gives India an opportunity to grow rapidly by the services export-led route.

Having explained the economic dimension of our vision, let us speak about the political dimension of our vision. The key to the political dimension is that India needs to reinforce its credentials as a liberal democracy.

This has two parts. First, India must place greater weight on individual rights and freedoms. The misuse of laws like UAPA, impulsive cabinet decisions without parliamentary consultation, suppressing unfavorable data and protecting free speech and criticism are critically important.

 We need to impose checks and balances that work effectively and, as do away with old colonial laws that allow tyrannical governments to arrest people who protest.

We need a government that learns. A beguiling but eventually debilitating cocktail of Hindutva-driven nationalism, sweetened with populist welfarism, and made politically attractive by a charismatic leader, is partly why we face these challenges.

Much of the political change we want to see involves what we call investing and empowering people. We need to give the Indian people the power to protest and also the power to decide. We also have the need to improve the education system and increase education outcomes.

The second political change needed is decentralization of government which involves devolving functions and funds right down to municipalities and panchayats.

It should be clear that politics and economics are intertwined and they hang together. The vision explained in detail has been crafted together with a few other like-minded folks.  It truly is an Indian vision.

Hopefully at some point someone, a political party will say this is the way to go.  This is not politics…It’s academic. It deals with ideas.

Opposing Viewpoints are Welcome.

Courtesy: Dr. Raghuram Rajan, Ex-Governor of RBI, Distinguished Professor, Chicago Booth School of Business