Rising India and Indian Communities in East Asia

19. A Critical Review of Indian Economic Performance and Priorities for Action

319 19 A CRITICAL REVIEW OF INDIAN ECONOMIC PERFORMANCE AND PRIORITIES FOR ACTION R. Thillainathan INTRODUCTION This฀chapter฀deals฀with฀the฀relative฀deterioration฀in฀the฀economic฀performance฀ of฀the฀Indian฀community฀in฀the฀post-1970฀period฀and฀the฀priorities฀for฀ remedial฀ action.฀The฀ year฀ 1970฀ marked฀ the฀ launch฀ of฀ the฀ Malaysian฀ government’s฀New฀Economic฀Policy฀(NEP)฀with฀the฀goal฀of฀reducing฀interracial ฀economic฀imbalances฀in฀employment฀and฀equity฀as฀well฀as฀eradicating฀ poverty.฀On฀equity,฀the฀explicit฀target฀has฀been฀to฀raise฀bumiputra฀ownership฀ to฀30฀per฀cent฀from฀its฀initial฀level฀of฀around฀2฀per฀cent.฀These฀objectives฀are฀ being฀achieved฀by฀according฀bumiputras฀a฀preferential฀treatment฀in฀education,฀ employment฀as฀well฀as฀share฀placement. The฀chapter฀is฀divided฀into฀five฀parts.฀Part฀I฀is฀an฀introduction.฀As฀a฀ backdrop฀it฀also฀gives฀an฀overview฀of฀the฀strong฀relationship฀between฀human฀ capital฀and฀economic฀development฀as฀well฀as฀of฀its฀relevance฀to฀the฀issues฀ discussed฀in฀the฀chapter.฀Part฀II฀examines฀the฀trend฀in฀the฀economic฀position฀ of฀the฀Indian฀community฀over฀a฀thirty-five-year฀period฀from฀1970฀to฀2005฀ and฀the฀key฀determinants฀of฀its฀under-performance.฀Part฀III฀deals฀with฀certain฀ key฀issues฀and฀challenges฀facing฀the฀Indian฀community฀and฀the฀nation.฀Part฀IV฀ makes฀an฀assessment฀of฀the฀priorities฀for฀remedial฀actions฀if฀the฀deterioration฀ in฀Indian฀economic฀performance฀is฀to฀be฀arrested฀and฀reversed.฀A฀conclusion฀ is฀presented฀in฀the฀final฀part฀of฀the฀chapter. 19฀Rising฀India.indd฀฀฀319 8/20/08฀฀฀2:18:10฀PM 320 R. Thillainathan The฀limited฀availability฀of฀data฀and฀studies฀has฀restricted฀the฀scope฀and฀ coverage฀of฀the฀chapter.฀The฀breadth฀and฀depth฀of฀work฀on฀the฀economics฀ of฀ inequality฀ including฀ the฀ economics฀ of฀ race฀ in฀ the฀ United฀ States฀ is฀ amazing.฀ In฀ Malaysia฀ where฀ the฀ affirmative฀ action฀ programme฀ on฀ behalf฀ of฀the฀bumiputra฀community฀is฀a฀key฀prong฀of฀government฀policy,฀much฀ less฀ studies฀ or฀ analysis฀ have฀ been฀ undertaken฀ on฀ the฀ subject.฀The฀ lack฀ of฀ transparency฀in฀disclosure฀of฀data฀is฀very฀glaring฀and฀has฀been฀justified฀on฀ grounds฀of฀sensitivity฀of฀the฀subject. The฀basic฀premise฀of฀the฀chapter฀is฀that฀a฀country’s฀economic฀development ฀requires฀supportive฀institutions฀as฀well฀as฀human฀capital,฀that฀is,฀a฀ ฀ well-trained,฀educated,฀hard-working฀and฀conscientious฀labour฀force.฀ ฀ And฀as฀an฀essential฀background฀to฀the฀issues฀discussed฀in฀the฀second฀ ฀ and฀subsequent฀sections,฀this฀introductory฀section฀gives,฀a฀quick฀overview฀ of฀how฀much฀of฀a฀country’s฀income฀growth฀is฀caused฀by฀a฀growth฀in฀ ฀ human฀capital,฀the฀critical฀importance฀of฀the฀growth฀of฀knowledge฀to฀ ฀ economic฀development฀and฀how฀the฀growth฀of฀knowledge฀is฀imparted฀ ฀ to฀and฀embodied฀in฀people฀on฀a฀continuing฀basis฀through฀education฀and฀ training. A฀ country฀ cannot฀ become฀ economically฀ developed฀ if฀ there฀ are฀ disparities฀ in฀ education1 ฀ and฀ if฀ the฀ workforce฀ is฀ not฀ well-trained.฀This฀ is฀ because฀the฀development฀and฀modernization฀of฀an฀economy,฀according฀to฀ Nobel฀Laureate฀Gary฀Becker,฀entails฀the฀systematic฀application฀of฀scientific฀ knowledge฀ to฀ the฀ production฀ of฀ goods.฀ Equally฀ importantly,฀ Becker฀ has฀ submitted฀that฀the฀continuing฀and฀sound฀growth฀in฀income฀per฀capita฀of฀ developed฀ economies฀ since฀ the฀ industrial฀ revolution฀ can฀ be฀ explained฀ by฀ the฀ expansion฀ on฀ an฀ ongoing฀ basis฀ of฀ scientific฀ and฀ technical฀ knowledge฀ and฀ the฀ ensuing฀ improvements฀ in฀ the฀ productivity฀ of฀ labour฀ and฀ other฀ inputs฀ used฀ in฀ production.฀ Insofar฀ as฀ labour฀ goes,฀ Becker฀ states฀ that฀ this฀ continuing฀growth฀of฀knowledge฀is฀imparted฀to฀and฀becomes฀embodied฀in฀ people฀through฀education฀and฀continuing฀on-the-job฀training฀and฀that฀this฀ generally฀increases฀the฀value฀of฀such฀education฀and฀training.฀Accordingly,฀high฀ school฀and฀college฀education฀has฀spread฀extensively฀in฀modern฀economies.฀ Young฀ people฀ without฀ a฀ high฀ school฀ or฀ college฀ education฀ are฀ not฀ being฀ adequately฀prepared฀for฀work฀in฀modern฀economies.฀And฀schooling฀raises฀ productivity฀and฀earnings฀mainly฀by฀providing฀knowledge,฀skills฀and฀a฀way฀ of฀analysing฀problems. Therefore,฀to฀improve฀economic฀well-being,฀what฀can฀make฀a฀difference฀ to฀the฀vast฀majority฀of฀people฀is฀the฀increased฀opportunities฀for฀education฀ and฀ thereafter฀ for฀ their฀ entry฀ into฀ jobs฀ which฀ gives฀ them฀ ample฀ scope฀ to฀ acquire฀ more฀ skills฀ and฀ knowledge฀ through฀ on-the-job฀ training.฀ If฀ the฀ 19฀Rising฀India.indd฀฀฀320 8/20/08฀฀฀2:18:10฀PM A Critical Review of Indian Economic Performance and Priorities 321 young฀do฀not฀acquire฀the฀basic฀linguistic฀and฀quantitative฀skills฀in฀schools,฀ then฀this฀will฀disadvantage฀their฀capacity฀for฀employment฀and฀training฀in฀ the...