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India: We are Rich, We are Poor

, March 31, 2014, 1 Comments

India Rich and Poor-MarketExpress“India is a Rich country inhabited by Poor people” … The generation going through its first pangs of mid-life crisis would recognize how this phrase was used as the opening remark in Indian geography classes.

Teachers took pains to explain that though there is widespread poverty, this can be removed once we exploit our natural resources to the benefit of the nation. Another factor that was implicit in the argument was that the natural resources belong to the nation and its populace.

Some of these facts remain true even today – India is still endowed with rich mineral resources, Indians still remain less well off than potential and very few of the Indians have got rich by exploiting the natural resources.

India produces about 89 minerals including 4 fuel minerals, 10 metallic, 47 non metallic, 3 atomic and 23 minor minerals (including building and other materials). Managing such a huge portfolio of minerals has not been without its share of slip ups and outright gross inefficiency.

Illegal mining had been rampant across the country, though more prominently highlighted in the case of Karnataka and Goa. There have been instances of illegal miners’ brush-ins with local administration across several states. Crony capitalism has led to a vast pool of these resources being usurped by well-connected citizens at throw away prices.

So what has this led to? Activism – to save the mineral wealth from the hands of predators has picked pace in last few years and has almost peaked now, to the extent that it has disrupted our industrialization and also our ability to finance our imports.

India has 3rd largest global coal reserves, but we are importing coal to the extent of US$ 16 bn. Domestic producers of natural gas get almost US$ 10 less than prevailing international prices, where as Indian consumers pay import parity prices for all petroleum related products. India’s iron ore reserves are at an astounding 28.5 bn tonnes, and we exported only 19 mn tonnes of this ore last financial (decline of 73% over previous year) – this must be by design. Production itself is down to 140 mn tonnes down from 220 mn tonnes three years back. Mining growth has come down from 7.9% in 2009-10 to two successive years of negative growth in the previous two financials.

Mining is definitely one area, where the present generation seems to care more for posterity than consuming all the wealth itself. Incidentally this is a more recent phenomenon. As Swaminathan Aiyar says, “What next do we import – sand, rocks? “ While the end to this chaos is still not in sight, the adverse impact of over-activism has been acknowledged and after a long time, the votaries of activism are on the defensive. Eventually the pendulum will swing the other way, better sense will prevail and the things will start getting done again. This may happen with or without regime change.

Is there any silver lining to this hugely expensive episode?

If it leads to a few of the following, the current pain may have been worth bearing – more efficient ways of mining, efficient pricing for mineral resources, end to illegal mining, new alternatives to current resources. Remember, shale gas was uneconomical a few years back. But the current crude oil price scenario and exploration technology makes it very competitive vis a vis conventional sources of crude oil.

  • P V Rajeev

    What is most important to be a rich country is capital resources and high quality human resources. This is more important than mineral wealth. Capital and human resources cannot be developed overnight. It can be acquired through sustained investment over a prolonged period of time. If you have mineral resources which are not exploited it does not contribute to a country’s GDP or income