As a competitive intelligence professional in an emerging economy, documentation is my pet peeve. Business and economic growth in developing economies will be higher with greater transparency and information, all other things remaining unchanged.

The argument is simple. Under-documentation is a big impediment to decision making. It makes informed decision making very expensive. This means that there is less efficiency in the system as a whole.

Market research professionals and competitive intelligence practitioners in India have long cried hoarse about the need for improving the (government) statistical machinery. For without it, we are all shooting in the dark.

I recently came across another interesting angle on documentation in developing economies!

Hernando de Soto, well known Peruvian economist and guru of trickle up capitalism, argues for yet another reason for improving documentation in the developing countries. He argues that increased documentation of activities (including identities of people) brings them into the legal system. They are then able to participate in the “neighbourhood economies” and this is a way out of poverty for them. This is how the “trickle up” happens.

A slum dweller without an address and identity proof finds it much harder to get employment than one who has it. If he owns a hut with a clear title, it has some value; he has some wealth. Without the title, he owns the hut because his neighbours know he lives there; he cannot monetise it.

His prescription is to start the documentation from the very bottom of the pyramid.

Nandan Nilekani’s initiative – the Unique Identification Authority of India (UIAI) for giving a unique ID (UID) to each citizen; does not have Soto’s rationale for documenting identities as part of its vision or mission; but will serve the same purpose.

The next step for the government is to integrate the UID with the remaining statistical machinery so as to have consistent information and databases. Put these developments together with the recent Right to Information Act – and I think I am beginning to see a light at the end of the tunnel – albeit a very small one.

In his current role as an influencing voice on the country’s economic policies he will have a direct part to play in converting much of that present continuous state to simple past tense. How much needs to be done to make India arrive? Or what policy measures[1] will make how much of her emerge? Answers to these questions are difficult to comprehend and definitely more difficult to implement in a billion-plus democratic India.

Let us look at few of the broad indicators that depict the current state of India’s economy (and the distance she has to cover to ‘arrive’).

• GNI per capita has tripled to ~US$3,000 over the last 8 years but India still ranks among the poorest lot of the economies (in the low 70s) in the global rankings. Despite being the 4th largest and the 2^nd fastest growing economy globally, India suffers from large scale poverty. The economic growth has been inequitable and inequality is increasing. Dr. Basu remarks, “it is unpardonable that an economy that is doing so well overall has somewhere between 220 and 280 million people living below the poverty line“. Unemployment, regional imbalances and lack of adequate social infrastructure are other pertinent economic issues that need urgent attention. These would require some complex structural adjustments and bold policy measures.

• Gross capital formation at 39% (aided by the impressive savings and investment behaviour) is one of the highest in the world.  This has created an enabling environment over the years for India’s high growth. But a lot is left to be done to make the growth inclusive. Taking examples from the current state of financial inclusion in India, government statistics reveal that only 5% of villages in India have access to banking facilities and that only 27% of cultivator farmers have access to any form of institutionalized credit. India’s status as a rising economic power is closely connected with how it can create opportunity and inclusion. Success of the inclusive growth initiatives will depend on the availability of credit, suitably structured to meet the financing needs of the targeted sectors. Access to credit is critical for the target segment to be able to take advantage of the opportunities and participate in the country’s growth story.

• Ease of doing business is a key indicator of the enabling infrastructure for “enterprise and innovation”. Looking at the progress India has made in facilitating business dealings (as captured by the World Bank’s Doing Business Index and India currently ranks at a low 133 out of 183 countries covered), the required infrastructure is still inadequate. For example, it takes 31 days (although it has halved since 2000) to start a business in India, against 5 days in the USA, 3 days in Singapore or 2 days in Australia. Again, showing the relative ease of enforcing commercial contracts, it takes almost 4 years from the time the plaintiff files a lawsuit to the time he actual ly receives payment. Measure this against 300 odd days it takes in Australia or 150 days in Singapore to enforce contracts. Basu argues, “To improve these constraints requires changes in the law but also changes in institutions and the culture of governance…. All modern market economies need a huge number of laws and regulations. Successful nations are ones where, despite the large body of laws, the bureaucracy runs efficiently.”

Much of Basu’s work revolves around developing government behaviour models using Game theory. He believes that the Indian economy has in place the requisite underlying structure of social norms and set of cultures for the effective functioning of an industrialized market economy. Given these fundamental soft-enablers, Basu then argues that ‘trust games’ will provide India an edge in giving the current growth momentum an added sustainable thrust.

Basu’s job may be made easier by a wiling-to-make-the-change government at the centre. In his words, “I felt that if any government was going to be daring and allow for major progressive changes it is probably this government.” It will be interesting to see what game-theory formations this man advises the government to play to make India arrive.

[1] Most of the policy choices that India has to make now are complex – “trade-off between inequality and poverty”, further liberalization but weakening the ability to control poverty (as shown by experiences across the world), capital inflow choices etc.

So will India become an economic giant? Well, I firmly believe we have the potential to be a formidable economic power by say 2050. Because we have the broad structural framework in place, we have the soft infrastructures functioning smoothly and not to forget our compelling demographics. All we need is to ensure efficient utilization of resources using innovative technologies and find ways to make the growth inclusive. Given that the fundamentals are in place, growth is not an issue, but the key question to ask is whether this is sustainable?

A lot will depend on the policy choices we make now. I am not talking about the policies on investment and governance, or economic inclusion and social welfare. Rather, I am concerned that the state machinery might overlook the importance of the changing environment and opt for seeking merits in the capital-intensive western model of growth. I am not concerned about the growth rate per se, because it is hard to comprehend that an economy with high gross capital formation and savings rate as ours, an economy which is driven primarily by domestic demand and that has development programmes to spend money on should not grow strongly. But what worries me is the sustainability of the growth model or to be more specific, the outcome of such growth in the context of environmental changes. What if after going full steam on a chosen path for say a decade, we realize that the realities of the environment then calls for a different policy approach. What if what we achieve in a decade from now becomes redundant because of misdirected policies?

The future will be dictated more by the realities of the physical environment rather than the economic realities. Sustainable Development is the next world order that will permeate all the global processes. So, what is good for the economy has to be good for the environment. And winners will be those that quickly adapt to the changing growth dynamics and embrace environmentally benign and smarter growth models. No development initiative can afford to ignore its impact on the environmental. In fact future policy making will be guided by the greater environmental well being.

The current level of under-development in India will work in her favour as this will allow her far more flexibility to adopt a sustainable development approach in dealing with environmental pressures than the developed economies. Unlike the West, India need not significantly undo or switch between contradicting models of growth.

India accounted for more than 20% of the world’s GDP in the early nineteenth century but lagged behind in the race as it missed the industrial revolution and subsequent development movements of the west. But the global economic scenario as it stands now provides us a chance to reclaim our glorious past. And this historic opportunity seems to be in our grasp. The onus is on the policy makers, now and in the future to make it happen.