Thursday, June 15, 2006

Why India cant fly - 1 (or, what The Economist wont tell you)

Last week, I posted a review of the The Economist's special report on India here. While critical on specifics, overall the report maintains a tone of awestruckness at the pace of India's progress. While there is no disputing the fact that something unusual is indeed happening, as an Indian I feel wary of taking the euphoria to heart. I see two main reasons why the run wont translate into flight.

1. Energy

In the recent State of Nation address given by the president of the United States, he talked about reducing the country's "addition" to foreign oil and developing sources like ethanol and fuel cells. The gesture comes too late, but nonetheless represents a turning point in the history of the US' energy policy. For all their faults, the American are strong-willed and there is no doubt that when using oil becomes economically unfeasible, they will have an alternative waiting at the backdoor.

Unfortunately, India can boast of no discussions, let alone strident proclamations such as these, in mainstream polity (with due respect to those few in India who have been campaigning for rethinking energy policies). Leaders who have successfully reformed and driven forward the country's economy seem unperturbed by the ominous energy scenario, and political attention on energy is restricted to the short term. As we speak, political parties are wrangling over the government's proposal to raise petroleum prices. When spokespersons for the industry (say, The Economist) talk about energy, it is more to lobby for reliability of immediate local supply than long term assurance.

While many pundits are predicting a keen race between India and China for dwindling energy sources to feed their growing economies, even without the competition India would still struggle if it has to keep up the current growth trend. From my layman's perspective, recent developments in the county seems to have been cast in the same mould that led other countries to prosperity in the past century. Nowhere do I find provisions anticipating a fundamental energy makeover in the future, or even attempts to deny its possibility.

The pursuit of an economic model more suited for the oil-secure age will take India only so far, forget helping her fly.

More later.

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