If India's Congress-led coalition government can deliver on its mandate, the long-term payoff could be tremendous, says an analysis published in a United States-based business magazine.
"There's little dispute that India can't develop into a modern economy while 300 million people subsist on less than $1 a day. The middle and upper classes thrived as growth averaged 6.2 per cent annually in the 1990s. But far from the marble-and-glass research and office parks in Bangalore, Mumbai, Hyderabad, and Delhi, 65% of Indians live on agriculture, a sector that has stagnated," says BusinessWeek magazine.
It also observes that nearly 40 per cent of Indians remain illiterate. Miserly government spending and poor management of rural roads, electrification, irrigation, health care, basic education, and sanitation have left most of this population behind. Indeed, through the hot growth years, the gaps between rich and poor and between urban and rural areas grew dramatically wider.
Given such unbalanced growth, many experts say it would have been difficult for India to sustain its success without a dramatic change in policy. Nor could it clock 9-10 per cent growth year after year a la China, which laid the groundwork for development decades ago by emphasising agricultural reform and primary education.
Unemployment in India is estimated at 7-10 per cent, and with 10 million entering the workforce each year, joblessness will worsen.
Economic growth must accelerate, because its current pace is "just not good enough to sustain a country with per-capita income of $500 and a population growing at 1.9% a year," says Ruchir Sharma, managing director of emerging markets at Morgan Stanley Investment Management.
Many of India's top technology tycoons agree the poor's needs must be met if support for liberalisation and foreign investment is to continue, says the magazine.
"We cannot only have IT-related development," says Infosys Technologies CEO Nandan M Nilekani. "We have to extend the success across industries from agriculture to manufacturing."
There is wide agreement on what the government must do. Start with agriculture, which has grown just two per cent annually in the 1990s -- about the same rate as India's population -- and now accounts for just one-quarter of the GDP. Only seven per cent of India's $125 billion in annual public and private investment goes to agriculture.
The government's farm subsidies lead more to market distortions than higher incomes, says Arun Kumar, chairman of the Centre for Economic Studies & Planning in New Delhi.
The machinery also is failing Indians in education. That may sound unusual to anyone familiar with India's astounding success in technology and skilled services, it says.
The real problem is with primary education. When they were at the same stage of development as India is now, Asian tigers like South Korea, Taiwan, and China focused on elementary and secondary schools, the magazine says.