A  hydroelectricity producing dam in Northeast India. Photo: NEEPCO
A hydroelectric dam in Northeast India. Photo: NEEPCO

Deng Xiaoping was once quoted as saying, “No matter if it is a white cat or a black cat, as long as it can catch mice, it is a good cat.”

It was a hard lesson Deng learned as secretary general of the Communist Party of China when Mao Zedong was chairman. He saw a country with tremendous potential but whose hope was virtually destroyed by the madness of one man in the name of the Cultural Revolution. One man, who promised that China would be the center of the world, became responsible for its destruction and fall.

It didn’t take much time for Deng to understand the problem. Mao was an idealist but China needed a pragmatic leader.

The above quote is a testimony to Deng’s pragmatism. After Mao’s death, he disowned some of Mao’s principles of socialism and embraced capitalism. Where Mao failed, Deng succeeded with his radical reforms and led the country toward unprecedented growth.

India today is in the same situation as China was after Mao’s Cultural Revolution. Narendra Modi has proved to be India’s Mao in terms of policy failures, despite being a popular and revered figure in his country, as Mao was in his.

But popularity is not a guarantee of policy success. On the contrary, it has been seen throughout history that most populist leaders proved to be the biggest disasters for their nation, Mao, Josef Stalin and Adolf Hitler being just a few examples. The back-to-back policy disasters in the form of demonetization, the GST, and the lack of substantive structural reforms has put a lot of pressure on the Indian economy.

But the Covid-19 pandemic has made matters even worse. India, which was one of the fastest-growing economies in the world for almost a decade, is now on the verge of depression. According to the International Labor Organization, more than 4 million young Indians have lost their jobs. Despite the Finance Ministry’s economic bailout packages and the Reserve Bank of India’s sharp interest-rate cuts, the economy has hardly seen any activity during the pandemic.

Most economists agree that India may have long an elongated U-shaped recovery. But this crisis has shone a spotlight on one of the biggest issues that have been ignored for decades: migration.

Covid-19 has revealed another face of India, one never shown in mainstream media, the plight of migrant workers. Shocking visuals started appearing on television screens, as with transportation systems initially shut down, many had no travel options, other than just walking barefoot back to their homes and villages, a glimpse of harrowing journey.

It was the worst domestic migration crisis on the subcontinent since Partition in 1947. Millions of unemployed wage laborers have left crowded cities for the countryside. One after another, they started their journeys of a thousand kilometers to their home towns carrying their belongings and children. And their numbers are outstripped government estimates.

Many of these migrants and daily workers had one thing in common. The majority of them belonged to BIMARU states, India’s least industrialized. BIMARU is an old acronym for Bihar, Madhya Pradesh (MP), Rajasthan and Uttar Pradesh (UP), which are mainly in the northern and eastern parts of India. So the question remains why so much of Northern and Eastern India is so underdeveloped.

India cannot grow if BIMARU states don’t

Until the early 1960s, West Bengal ranked second only to Maharashtra as the country’s most industrialized province. Calcutta acted as a major trading hub for the entire northern region, as much of it is landlocked. It acted as a transit zone for many of its neighboring states, especially Bihar and UP, which were rich in mineral resources. It was a lifeline for economic activity in the region.

But in 1952, the government of India introduced a “freight equalization” policy. Under this policy, the central government subsidized the transportation of minerals to factories set up anywhere in the country. It hurt the economic prospects of mineral-rich states like Bihar, Bengal, MP and UP, and Orissa (now known as Odisha), as everything would then be available at the same price in all parts of the country through government subsidies. It took away the competitive advantage of these regions.

Because of the relentless pursuit of this policy for decades, industries started to relocate closer to the coastal trade hubs of Western and Southern India. Those regions flourished at the cost of Eastern India. It ensured that Maharashtra and Gujarat enjoyed hegemony in metals and cotton, while Bihar and Bengal and got the upper hand in neither.

Though the policy was canceled in 1992, four decades of relentless under-investment forced the region into darkness. Adding salt to the injury, Bihar and UP, the two major states of the region, received less per capita allocation than any other Indian states from the First Five-Year Plan to the 11th.

The process of marginalization has resulted in low fiscal resources, low absorptive capacity, low private and public investment, poor infrastructure, and low quality of human resources. Hence the states’ vast population has remained a liability with poverty, illiteracy, malnutrition, and low skills. It looked as if there was a deliberate design to make sure that these states never saw any development.  

Bihar, UP and the Eastern states together are home to more than 40% of India’s population, and have one of the lowest per capita incomes in the country. The entire Eastern belt poses a serious development challenge, especially Bihar and UP (mainly its eastern region), not only for India but for the global community, because India will not be able to achieve the United Nations’ Sustainable Development Goals unless poverty is reduced substantially in these two states.

The world has a stake in India’s success and India will not succeed until this region is developed. That’s why it’s necessary to address this long-term problem; there is a vital need to support these regions through policy and program assistance.

To address the development needs of the region, there is an urgent need to set up the Eastern Economic Corridor. A new development strategy should be introduced to harness the potential of the region. The new strategy must focus on exploiting the geographic advantages for industry in these states, which are the source to more than 80% of India’s mineral resources.

Odisha will become a catalyst as its Paradip Port will act as a transit zone to export and import products. Attempts must be made to harness the immense tourism potential of the region, centering primarily on Buddhist circuits.

The cultural influence of these regions on Asia is significant, as they are the center of two of the world’s oldest religions, Buddhism and Hinduism. An expressway connecting all four major cities of the Buddhist religion – Bodhgaya, Sarnath, Nalanda and Rajgir – as well as Lumbani will provide access to a market of 450 million people, many of whom live in neighboring Asian countries. Apart from boosting tourism, it will also provide inclusive economic growth and great opportunities for micro and small enterprises.

Several large rivers including the Ganges and Brahmaputra as well as numerous reservoirs in the region could also support various hydro-electric projects, providing an excellent case for overall development. Similarly, the expansion of the Grand Trunk Road will open the gates to new opportunities as well as giving a major boost to India’s “Look East Policy.”

For India’s economy to expand and grow as rapidly as China’s, we need to make a difference through our virtues rather than vulnerabilities. We have to overcome the mindset of putting too much focus on a rogue state like Pakistan and start looking for the new opportunities in the East.

It’s a moment of realization for Indians that too much focus in the North or Northwestern region is a major blockade to increasing India’s influence in Asia. The Eastern Economic Corridor is the only hope toward strategically and economically challenging the growing power of China in Asia. It will add credibility to India’s claims of leading Asia rather than being merely a regional power of South Asia.

A project on par with China’s BRI will certainly counter the effect of Chinese influence in the region and provide Asian countries as alternatives to trade. What India needs at this juncture is Deng-style pragmatism.

Ravi Kant

Ravi Kant is a financial writer with a deep passion for technology and economics, and also covers international politics and cybersecurity. He has wide experience in the financial world and his analysis has been published in leading magazines such as Mogul News and The Indian Economist. He is author of the book Coronavirus: A Pandemic or Plandemic. He tweets @Rk_humour.