Submitted by alvin on Mon, 2016-08-08 13:37 When William Shakespeare said “Expectation is the root of all heartache”, he was talking literally. But expectations in the 21st century have literally become the root of all economic problems around the world. India has a particularly bad dose of great expectations fuelled by the nature of our political system. Be it a right-wing party, a left-wing party, a centrist party, or a communist party, promises abound. If Atlas, the Greek god who so easily carried the world on his shoulders, carried the world’s expectations instead, he would be crushed! But, what does the world and India expect? Money; a better standard of living; a higher disposable income; a higher return on savings, and a larger piece of the economic pie. Unfortunately, the basic economic principle of human wants being unlimited but resources being scarce apply everywhere. The problem we face in India is best encapsulated in an interesting quote I saw from an anonymous author who said, “Don’t tell me the sky is the limit, when there are footprints on the moon”. What this means is that we can continue to promise and raise the expectations of people and then pass the buck to someone else when we are unable to deliver. Of course, the danger to our country is that no one is doing the math. And what is the math? The math is that economic power makes a country a superpower. The United States is a superpower because it has unparalleled economic power. China is a threat today because it has enormous economic power. The British became an empire due to economic power. So is it just only about economic power? No. population, geo-location, natural resources, and a host of other factors make a difference too. Brunei is a very rich country, but has no economic power. Bangladesh is a very populous country but has no economic power. So where does India stand on all this? India is in an enviable position. We have the 2nd largest population in the world. We have the largest youth population in the world. We have the 9th largest water resources in the world. We have the 4th largest coal reserves in the world. We have the 7th largest iron and manganese ores in the world. And the list goes on and on to show that we have a great combination of human, natural and mineral resources. We have a stable democracy. We have had no major problems with our economy in the last 50 years compared to a Brazil or even a pre-war Germany. But India’s economic power is close to non-existent in the world today. It is an economic power only in the minds of the Indian people, and no one else. Sceptical? Are we really in this state in the 21st century? A simple example will enumerate my point. In 1975, 1 US dollar was 8.38 Indian rupees: a ratio of 1:8. In the same year (1975), the ratio of the US dollar to Chinese yuan was 1:2. Today, in 2016, the ratio of the US dollar to Chinese yuan is 1:6. The ratio of the US dollar to Indian rupee is 1:67. This is a simplistic example, but one which indicates the extent to which Indian economic power has eroded. The reason is that expectations have been the bane of our country. This has cut across state, community, caste, religion and region and become prevalent in every part of our society. We have all become so accustomed to ‘goodies’ that we consider them necessities. Whether it is subsidies like cooking gas for everyone, rice for Rs2, free TVs, mobile phones, and other election goodies, the list goes on and on. A favourite method today is to promise more and raise expectation as high as possible. This, it is hoped, will translate into votes and more power. But it just devalues our entire economy and makes the road to economic prosperity that much harder. What’s the solution? Let us take the example of perhaps the greatest Indian in the last 500 years: Mahatma Gandhi. Gandhiji did not raise expectations. He managed them! Our Independence movement is replete with incidents where expectations were managed. When Gandhiji wanted to strike, he called for a day of prayer and fasting, taking the wind out of the sails of the authorities. But today we pander to expectations rather than manage them. We need to address this attitudinal problem. Indian pride is admirable, but reality is important. And the reality is that we are becoming a non-economic power worldwide. For all its development problems, till 1966, India was a ‘golden’ economy with large potential: we had an exchange rate of 1 dollar to 7.5 rupees. We have become ‘gold plated’ economy now with an exchange rate of 1 dollar to 67 rupees. We must ensure that we do not become ‘gold painted’ economy next and stop our economic decline. The answer? Manage expectations! Author: Dr Joseph Rasquinha, a Bengalurean, received his PhD in Economics from St. Andrews University, Scotland. An economic analyst, he is currently the CEO of Blueleaf Software, Bengaluru.