With India’s Independence Day just days away, let’s take a look at the country’s economy. This year, the world economy is expected to grow at 3.%. But India is expected to grow at 7%, which is over twice as fast. We can be happy that India has become the fifth-largest economy in the world and look forward to becoming the third-largest soon. But in per capita terms, India could have done a lot better, if not for mistakes of the past. Our per capita GDP is $2,731, which is only 20% of the world GDP per capita of $13,840. This percentage has been going up for many years now. In 2014, it was at 14%.
The next fact might come as a surprise. Around the time of independence, this percentage was already at 18%. Why did it take over 70 years to go from 18% to 20%? Because things went horribly wrong in between. The Nehruvian economic model adopted after independence cost India. By 1991, India’s per capita GDP had shrunk to just 6% of the world’s per capita GDP. In other words, India became three times poorer in four decades of Nehruvian socialism. During these years, India’s economy performed worse than almost every other country’s: worse than the countries of the West, worse than sub-Saharan Africa, and yes, even worse than Pakistan. By 1991, the average person in Pakistan was about 26% richer than the average Indian.
How Much Money Did India Lose?
So, how much money did India lose by falling behind the rest of the world? To our surprise, nobody seems to have added it up before. But we can easily look up the numbers in the World Bank database.
In 1961, India’s per capita GDP was $83, while the world per capita GDP was $450. By 1991, the latter increased to $4,426. What if India had grown at the same rate? Then our per capita GDP should have been $816. Instead, we only managed to reach $304 in 1991. That works out to a loss of $512 per Indian. Multiply this by the population, and it comes up to $455 billion. Multiply that by inflation, and the loss is $1,051 billion. An astonishing amount of over one trillion dollars in 1991 alone.
But wait! That is just the loss for one year. We still have to look at the other years. We started with the year 1971, allowing a “grace period” of 20 years since India became a republic.
These aren’t just dry numbers either. There is a fascinating pattern that matches the politics. For 1971, the loss was $196 billion. For the year 1975, the loss was over twice as much, at $414 billion. So, the downfall between 1971 and 1975 was rapid. Note that these are also the years leading up to the Emergency. By 1975, India was drowning due to 25 years of failed economic policy. Inflation ran at 29% the year before, and GDP growth was down to 1%. The Indira Gandhi government first seized private banks, then foreign investments, then middle-class savings, then everyday food, and finally, democracy itself.
Losses After 1975
After 1975, we see a relatively stable phase in the data. India was still losing huge amounts of money because of tepid growth rates, but the losses remained between $400 billion and $600 billion a year. This phase lasted till 1985. The final collapse started in 1986, as Rajiv Gandhi’s policies began to take effect. The losses mounted quickly: $450 billion in 1985, $600 billion in 1986, and nearly $800 billion in 1988 and 1989. Almost $900 billion in 1990, and finally, over one trillion dollars in 1991. In total, the loss to the Indian economy between 1971 and 1991 works out to a mind-boggling $11.246 trillion. That amounts to Rs 942 lakh crore.
It is difficult to put such astronomical numbers into context. For the current financial year, the budget of the Union Government is around Rs 48 lakh crore. We wonder how many factories, schools, hospitals, roads, airports, railways, tanks, ships and planes we could have had for Rs 942 lakh crore.
This Independence Day, we might as well draw a lesson from the past. After all, we have collectively paid Rs 942 lakh crore for it.
(Abhishek Banerjee is an author and columnist and Karuna Gopal is President, Foundation for Futuristic Cities.)
Disclaimer: These are the personal opinions of the author