A Nano Step for Indians, A Mega Opportunity for India
As I write this, the Tata Nano is being commercially launched. Another milestone in the eventful path of the 'Rs 1 lakh - People's Car'. Along its illustrious journey, it has generated a fair amount of controversy - including concerns about increased pollution and higher traffic congestion in already gridlocked cities.
Such reservations aside, the launch of the Nano comes at a critical moment for India -with the beginning of a period of economic slowdown, and no clear solutions on how to turn things around. Yet, the 'Nano Moment' presents unique opportunities that could not only revive the economy, but also transform India for long decades of prosperity.
Among other comments, the manufacturers stated that they expect the car to be popular in India's rural markets. While India has one of the world's longest road networks, most roads in rural India would not allow a car like the Nano to ply on them. Will rural India take this moment to demand that the government pay attention to their plight so they can own a Nano which can be used as a vehicle and does not become an expensive outdoor showcase item?
The national highways projects initiated a decade ago have connected the main commercial centres of the country, spurring economic activity along the way. But there has not yet been any serious thought or investment towards roads for rural India. Such roads, if we built them today, would not only spur the sales of Tata Nanos - but, in the process, also act as an important stimulus for the economy that could start yielding results immediately, and well into the future.
In the short term, the process of construction alone will create direct employment for the labourers engaged in it, in much the same way the highways project and other urban construction projects have. Rural India suffers from high levels of disguised unemployment, especially for those employed in agriculture. Currently, their only route for better incomes is to migrate to cities. Rural roads projects can draw such people with the promise of steady employment and higher incomes, which in turn can have the much vaunted 'multiplier effect' on the other parts of the local and national economy. And yes, lead to more sales of Nanos.
In the longer term, a better connected country can provide the backbone that encourages investment in rural areas and becomes a key ingredient of high economic growth. Rural roads, connected to a vast network of highways can provide the access and mobility that a country as large and diverse as India needs to better integrate both its economy and society at large. A look at the US following World War II and China in the last couple of decades justifies such a policy.
Also, with richer rural economies, people from the villages would be encouraged to stay back and not migrate as much to cities and industrial centres, which are already stretched with large populations and limited resources. Economic growth will be more equitably distributed - not relying purely on urban/ industrial 'trickle down'. Politically, this would be a 'pro-poor' effort, something with the potential to generate electoral dividends.
Obviously, there will be significant costs and risks attached to any such initiative - high government spending, which leads to high budget deficits and the ugly possibility of high inflation, and the range of other negative consequences that these can individually have. Neither the central government nor the state governments can embark on this alone. In a politically fractious country like India, that could lead to stalemate, especially if the two administrations are political rivals.
Yet, of all the other stimulus programmes being rolled out, this would probably have the most far reaching benefits that are both immediate and long term in nature. Not snatching the Nano Moment would deprive the people from the People's Car and the country from a truly prosperous future.