"By mid century India could overtake the United States by absolute size," says Jeffrey D Sachs, Special Advisor to the UN Secretary General on Millennium Development Goals and one of the world's foremost economists.
In this interview with The Smart Manager, he offers a realistic course of action which India could follow to achieve this.
Time magazine in April 2004, declared Professor Sachs as one of the 100 most influential people in the world. As the Special Advisor to UN Secretary General Kofi Anan on the Millennium Development Goals, he says, "India is poised to become one of the three large economies of the world. By the mid century I think India could overtake US by absolute size."
Professor Sachs (born in Detroit, 1954), an alumni of Harvard University, is director of The Earth Institute at Columbia University where economists and scientists work together on environment and social issues.
And it is no wonder that he seems clearly excited about the fact that India's President is a scientist and the prime minister, an economist.
Being internationally renowned for his work as economic advisor to governments in Latin America, Eastern Europe, the former Soviet Union, Asia and Africa he says as far as India is concerned, "We are going to see growth led by services, export-oriented manufactures, and by parts of the agricultural sector."
However, Professor Sachs, who is also Quetelet Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University, is clear about the fact that governments should not be running industrial and insurance companies, hotels and banks.
But when it comes to agriculture, he emphasizes that the government has a role in promoting basic scientific research in improved crop varieties, bio-technology and agricultural expansion so that farmers can adopt modern technology.
Jeffrey D Sachs, author and coauthor of over 200 scholarly articles, explains among other things, as to why problems don't go away without money and why you have to throw money at them.
Increasing the productivity level of the agricultural sector is critical. What are your suggestions?
I don't think an economy as complex and diverse as India's is going to be led by any single sector. India is clearly on its way to becoming one of the largest and most diverse economies in the world.
And we will have to see if the economy is well managed, that the international system remains open, and that is something that India will have a role to play in accomplishing as well.
We are going to see growth led by services, export oriented manufactures, and by parts of the agricultural sector. I should say right from the start that I am not a doctrinal, laissez-faire economist. I am a strong believer in international trade and in market forces; but I believe there is a role for governments as well as the markets in agriculture, and, to a lesser extent industry.
Now it's a matter of defining what the appropriate roles are. Governments should not be running industrial companies or hotels or banks and insurance companies. But if you turn to agriculture, there is no doubt in my mind that the government has a role in promoting basic scientific research in improved crop varieties, biotechnology, in helping agricultural expansion so that farmers get the information they need in order to adopt modern technology.
Governments also have a role in liberalising markets and helping ensure that India's competitive farmers have access to foreign markets, in providing basic rural infrastructure, such as road to villages and electrification.
In some areas it doesn't matter letting private companies provide electricity, but there is a role in making sure that the power effectively reaches the poor. I don't believe that this has been done well, giving away free energy has not translated into reliable energy.
You mentioned the use of IT in agriculture. Can you elaborate?
Agriculture is a very technology-based sector. One of India's fundamental breakthroughs, without question, was the Green Revolution of the 1960s which helped India escape from decades of extreme suffering.
It was achieved using what was then the most modern technology in terms of improved crop varieties and combining them with what was then modern systems for irrigation and fertilizers use. There is no question that what was the state-of-the-art technology 25 years ago is very backward by today's standards.
Huge improvements in every aspect of agriculture are taking place. Biotechnology is improving crop varieties through pest-resistant seeds. And now biotech scientists in both public sector and private sectors have made breakthroughs in drought resistant seeds, which may be one of the most important breakthroughs for India in the future.
India has a chronic crisis of water, and the advances in drip irrigation are tremendous, so that whatever water there is reaches the roots of the plants and is therefore used far more efficiently.
The water crisis is getting worse all over India. Water which has been millions of years in the making is being drained in a matter of years. We need more scientific approaches to water management.
Today one can help farmers identify when to plant through climate modelling. For example, better modelling of the monsoon cycle can be used to improve water reservoir management, irrigation practices and timing of crop planting.
Satellites or global positioning systems can help farmers identify where the exact nutrients are in the soil. So instead of using massive amounts of fertilizers which end up running into rivers and polluting the waterways besides being expensive waste for farmers, global positioning systems help farmers identify exactly where on their farms certain nutrients should be put, how to use less fertilizer and in which areas exactly it ought to be spread.
The continuing gains in crop productivity that have been achieved in the United States are now underway in many other countries.
Farmers need to have incentives to use scientific and technological inputs; they need to have access to high technology. That requires a significant governmental role.
Apparently new research shows that a black cloud is hovering over India, one which is adversely impacting weather conditions in China, leading to the drying up of Northern China. What exactly is happening here?
This again is an area where science is proving helpful. Big improvements have been made in recent years in understanding the Asian climate system. And one of the shocking discoveries is the black smog that has spread over India. The smog is coming from millions and millions of households and small industrial users burning fuel wood and coal in dirty, polluting and inefficient ways.
They are not just polluting homes and causing respiratory diseases, but they are creating a chronic smog that is spreading over much of Asia. Researchers, including researchers at the Earth Institute, are beginning to get a better understanding of the effects of this massive cloud in Asia.
It is changing the cloud formation, the amount of radiation reaching the earth and weather patterns, especially the rainfall pattern. It seems to be leading to a significant drop of rainfall over Northern China, Beijing and regions to the west of Beijing.
Of course, hundreds of millions of people depend on rainfall for food production. This is a serious phenomenon that will have to be addressed. At this stage, the scientific hypothesis is based on modelling and recent rainfall evidence.
The Earth Institute is perhaps the only research organization in the world where economists and scientists work together on environment and social issues. You are excited and happy about the fact that our President is a scientist and the prime minister, an economist. So is the feeling then of, 'Oh, the people in power are like us, they understand my lingo!' Do you see India as your new laboratory?
I do not see countries as labs. The things that we are talking about are not wild experiments in a laboratory. We are talking about tried and proven methods of using international trade or using investments in science and technology for agriculture, using increased investments in health to promote economic development.
So in this a sense I wouldn't say the word laboratory but what I would say is that India is poised to become one of the three large economies of the world.
By the mid century I think India could overtake US by absolute size. My rough back-of-the-envelope calculation says that by the mid century, if India manages the economy properly, and we do not make disasters on the international scene, India could have one-fourth the per capita income of the United States.
Combine that with roughly four times the population, and what you have is an economy bigger than the US economy. Now I think that this is not only possible, it is extraordinarily exciting and positive not just for India but the whole world.
The whole world would benefit fantastically from a dynamic, prosperous and scientifically productive India. This is going to be of global benefit.
I think the new government is absolutely a dream team. The prime minister is a leading figure in development economics and the father of economic reforms in this country with an experienced cabinet and a tremendous social agenda.
The advancements in health and education, in rural infrastructure and agricultural productivity that are being talked about right now aren't concessions to a left wing agenda or a painful compromise. These were investments that should have been made in the last ten years but weren't made.
And I kept asking on every visit, where is politics in this country? Why are young girls still not completing school in this country? Why isn't there more public pressure? Frankly, I was very gratified by the election results.
During the recent elections, some progressive chief ministers were booted out of power. What do you make of that signal?
In all democracies one group gets booted in one day and out another: governments will keep rotating. It may look like instability but it actually is one of the deeper and better ways of controlling corruption and not allowing it to become entrenched. What it has not done is to derail economic reforms.
I am sure Indian politicians are asking themselves, that if they make investments in IT, if they try to create urban centers of excellence, they are not going to stay in power.
Politicians in this country understand that they are going to be in and out of power. What happened in India after the elections was amazing. Incumbents were booted out, yet the handover happened so incredibly peacefully. There was not even a small power struggle to try to cling to office. It was an amazingly smooth transition.
There is such an unbelievable amount of social capital in India. One appreciates and admires to the limit what has just happened in terms of what it really means about the capacity of this country to absorb change and manage itself peacefully. It is a phenomenon because I see the opposite all over the world.
Whether it is population control, healthcare, education, we all know what to do. How can India implement better and scale up faster?
There are issues of political correctness, of knowledge and of money. I do believe in throwing money at a problem. Yes, I understand the corruption issues, but without money, the problem is not going to go away.
India should increase public spending on health to at least 3 per cent of GNP within three years. The increase should come mainly at the state level and mainly to finance prevention and treatment of primary health conditions such as infectious diseases (AIDS, TB, malaria, respiratory infection diarrhea), nutrition and reproductive health.
In education, public spending should rise to at least 5 per cent of GNP. Again, the increase should come mainly at the state level, and mainly to finance universal education through age 14. Mechanisms such as a school midday meal programme are extremely effective for increasing school attendance, for example.
When you are in India, you talk about how the Indian economy has the potential to really grow. What do you say when you go to China?
China is absolutely booming. I have been regularly going to China as I have been coming to India. China's economic reforms are real, the growth is dramatic.
China is eating your lunch. You should be doing what they are doing. They are creating millions of jobs in manufacturing and exports. Why isn't India doing it? Their exports have grown from about $20 billion to $300 billion, why is India's merchandise exports only $65 billion to $70 billion?
While India is still debating whether foreign direct investment is good or bad, China has attracted $60 billion, dollars which you aren't receiving. I have been watching Chinese reforms and I believe in them. I think China could overtake the US economy in absolute size within the first quarter of this century, by 2025.
But China has some very, very serious problems. First, its political system is out of date, and out of sync with the modern bustling dynamic economies. A centrally ruled administrative state could make sense for a country of rice growing villages but it does not make sense for a modern dynamic economy.
So China has a major issue of political change in the coming decades. There is major poverty in the Western parts of the country. China, like India, neglected the public health system. The environmental management is as precarious in China as in India: a massive water crisis, climate crisis and unreliable energy system.
It faces economic reform challenges; it faces political restructure challenges from a completely traditionalised centralised state to a much more open and democratic system, which will come in a decade in China. There is a long-term transformation underway.
Both India and China have similar problems in environment, in the lack of proper social investment, in the challenges of catching up. The fact that China is ahead in the economic reforms means that India can learn from China in regard to a role in the world economy.
The fact that India is ahead in political decentralisation and democracy means that China has a lot to learn from India in that regard.
Economic development is both the cause and consequence of urbanisation. Clearly in the Indian context massive rural to urban migration is not an option, because the urban sector is already fairly very crowded. What do you recommend?
The urbanisation rate in India depends on how you measure it. Currently, it is about one-third of the population. India will certainly become a predominantly urban society. The question is how, when and where? Traditionally, economic development takes places not only in urban areas but also in coastal areas.
Take the US, for example, which is a continental country. As its economy developed in the 19th and 20th centuries, a significantly rising proportion went to the coast from rural areas. India already has an important coastal economy, and I expect that India's coastal urban areas will continue to grow.
Mumbai is one of the largest urban centres in the world with probably 15 million to 20 million people living in the greater metropolis area. It will continue to grow to 30 million and 40 million over time. The urban centre will spread up and down the coast in the same way that in Japan you have a continuously densely settled urban area from Tokyo all the way to Osaka and Kyoto.
It is much harder to get economic development taking place in the deep interior of India than it is along the coast.
In 2001, you published a paper on India's Decade of Development. What are the top four goals you set out?
This paper, written with Nirupam Bajpai, was a response to the government's announcement from the ramparts of the Red Fort on August 15, 2000, that it aims to double per capita income by 2010.
In the paper, we suggest some development targets. First, a decline of infant mortality rates from around 80 per 1,000 live births to below 30 per 1,000 live births by 2010. This should be combined with explicit targets for halting the AIDS epidemic, and treating key diseases such as malaria and tuberculosis.
Second, a reduction of adult illiteracy from around 45 per cent to less than 20 per cent by 2010.
Third, universal primary education for ages 5-14 for girls and boys with a school for all within five kilometers of home.
And last, all villages should posses electricity, a trunk road, telephone and Internet connectivity, a school, clean water and sanitation, a village health worker and local self-government.
As I said earlier, problems don't go away without money. You have to throw money at them.
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Published with the kind permission of The Smart Manager, India's first world class bi-monthly management magazine.