Dr. Susmit Kumar, Ph.D.
NITI Aayog has recently proposed that only electric vehicles should be sold after 2030. It has also suggested that the ministry pilots an e-highways programme - with an overhead electricity network - to enable plying of trucks and buses on select National Highways (Niti’s new road map: Only electric vehicles to be sold after 2030, Deepak K Dash, The Times of India, June 17, 2019).
Niti Aayog’s New Electric Vehicle Policy is being touted as Clean Fuel technology use for the clean air. But actually it is a major step towards achieving trade surplus because India cannot even dream of becoming an economic superpower without having trade surplus for at least a decade and a half to accumulate couple of trillions of dollars as FOREX (FOReign EXchange Reserve). This was a major recommendation by Dr Kumar in his 2017 papers (“India, China and Growth Rate,” April 16, 2107; Trade Deficit and India’s Missing USD 1.5 Trillion FOREX, August 11, 2017) and also in his book "India is a Country, not a Company - How Anglo-US 'Imported' Economists Misled and Mismanaged the Indian Economy", Susmit Kumar, Munshiram Manoharlal Publishers Pvt. Ltd., New Delhi, 2018. It is worth noting that crude oil import is the costliest item among India’s regular imports. Normally the crude oil import bill is about $130 billion a year, but when the crude oil price rises above $80 a gallon in the global market, this crude oil import bill goes as high as $200+ billion a year, resulting in sharp devaluation of rupee.
[In his April 2017 paper, India, China and Growth Rate, April 16, 2017, Dr Kumar also discussed the highways with overhead electricity network with even a photograph (please see part of the paper at the bottom) which is also the Niti Aayog’s proposal for having an overhead electricity network - to enable plying of trucks and buses on select National Highways.]
After the sharp devaluation of the Indian rupee due to the high crude oil price during 2011-13, some economists even started to write the obituary of the Indian economy. At the time, one research analyst at Morgan Stanley even came up with a new group, called “Fragile Five,” for Turkey, Brazil, India, South Africa and Indonesia as these five countries were facing serious economic setback. A point worth noting is that Russia and China were not included in the new club of “Fragile Five”. Both Russia and China have been running trade surpluses since the early 2000s. Had high crude oil price persisted for a couple of more years, India would certainly had to go to the emergency ward of the IMF, wiping out its decades of development due to the IMF’s bitter medicine of getting rid of subsidies to balance the budget, significant increase in the interest rate, and selling the crown public sectors to Wall Street bankers at throwaway prices.
India’s total trade deficit during 1999-2016 was $1.6 trillion (please see the chart at the end). India paid for this trade deficit by the NRI remittance and FDI. If India would have had just the trade balance, its FOREX would have at least $1.6 trillion above the current FOREX and India would have been at the threshold of becoming a superpower along with China. India’s Rupee would have been added as a world reserve currency following its addition to the IMF’s Special Drawing Rights currency basket.
During the 1999-2016, India not only lost $1.6 trillion of FOREX due to trade deficit but lost nearly $3 trillion of economic activities (worth of jobs) in its domestic economy. As explained in my article The Hidden Cost of Imported Items and The Need to Redefine Modi Administration’s “Make in India” Policy”, the total number of jobs lost due to trade deficit may be two to three times that of the actual factory jobs, considering the indirectly associated jobs as well, such as in schools, hospitals and in the auto sector, etc., as factory workers would spend their income in such associated fields.
Had India had the $2 trillion FOREX, it would have had FOREX firepower to match China’s OBOR (One Belt One Road) spending in every part of the globe. Apart from this, all the Western countries and ASEAN countries, due to having territorial dispute with China in South China Sea, would have been in India’s camp against the authoritarian Communist China. Even Russia would have been in India’s camp because it knows that it is just a question of time before China would claim Far East Russia where the Russian population is on continuous decline and cheap Chinese labour are flooding the region.
Once India has achieved trade balance/surplus, the NRI remittance and FDI would prop up the FOREX rather than paying the trade surplus, resulting in $2 to $3 trillion FOREX in 8 to 10 years. Once India has trade surplus, it will not have to beg for FDI. Instead foreigners would make a beeline for a pie in the world’s largest democratic country having better safeguards for investment than a restricted country like China.
People may question how the electrical power needed would be produced. The deserts of Rajasthan and Gujarat have the potential to provide electrical power for entire India. A study has shown that a 35,000-sq.-mi. (90,600 sq km) chunk of the Sahara — smaller than Portugal and a little over 1% of its total area — could yield the same amount of electricity as all the world's power plants combined. A smaller square of 6,000 sq. mi. (15,500 sq km) — about the size of Connecticut — could provide electricity for Europe's 500 million people (Out of Africa: Saharan Solar Energy, Vivienne Walt, Time, Jan. 15, 2009)
For only E-vehicle after 2030, India needs to secure its growing demand of rare earth elements by increasing own domestic production and from non-Chinese sources globally. Rare earth elements are essential part of many high-tech devices, including solar cells and electric vehicle batteries. Until 1948, most of the world's rare earths were sourced from placer sand deposits in India and Brazil. Through the 1950s, South Africa was the world's rare-earth source. Through the 1960s until the 1980s, the Mountain Pass rare earth mine in California made the United States the leading producer. Today, the Indian and South African deposits still produce some rare-earth concentrates, but they are dwarfed by the scale of Chinese production. In 2017, China produced 81% of the world's rare-earth supply, mostly in Inner Mongolia, although it had only 36.7% of reserves. If China were to cut off the exports, the results for the technology sector would be disastrous. This occurred temporarily in 2010 when the Chinese had tensions with Japan due to a maritime dispute. They stopped all their exports to Japan and reduced their exports from 40 to 30 percent. China demonstrated to the world that they would use this tactic as a means of coercion should need be. China is giving the hint that it might use rare earth elements as a weapon against the US, in response to President Trump’s trade war with China, which would devastate the US technology sector.
Part of Dr Kumar’s paper “India, China and Growth Rate,” April 16, 2107.
(3) India needs its “Landing on Moon” Moment: If India aspires to become a super-power, it has to do something big to claim the super-power status. When watching Soviet Union's double-digit growth rates during early 1950s to the mid-1960s (read: my article Communism Collapsed Due to Collapse in Oil Price in Late 1980’s and German Banks – Not Due to Reagan), the Americans were stunned by hearing on their radios the beep of the tiny Soviet Satellite, Sputnik, which was visible also. Sputnik’s radio pulses were detectable. Four years after the Sputnik shock of 1957, the cosmonaut Yuri Gagarin became the first human in space on April 12, 1961, greatly embarrassing the U.S. Then in May 1961, President John F. Kennedy announced the dramatic and ambitious goal of sending an American safely to the Moon before the end of the decade. In general, Kennedy felt great pressure to have the United States "catch up to and overtake" the Soviet Union in the "space race." It is worth noting that the US was able to land its two astronauts Neil Armstrong and Buzz Aldrin on Moon on July 20, 1969. Mr. Modi needs to do something big similar to Kennedy’s vow to land humans on Moon. As the crude oil is the most expensive item in India’s import, let Mr. Modi vow to eliminate the crude oil bill in import within say 5 or 7 years by utilizing renewable energy resources. There can be several ways to achieve this goal. I would like to give a simple example. In Europe, firms are coming up with ways to eliminate use of oil/petrol in transportation, Electrification of road freight transport being one among them which is actually more than 100 years old technology. In US, “Internet of Things” technology is being used in autos so that one auto can communicate with others to avert collision - this can be effectively used if autos would run using the overhead electric lines on highways. There can be several other technologies which can help India wean away from crude oil import. I have faith on Indian brains to achieve the goal of eliminating crude oil import within a short time. In nearly all US universities, more than 80% to 90% of professors and research (MS and PhD) students in engineering and computer science/technology are either Indians or Chinese. Same is true in all the research labs in the US. More than half of the programmers in San Francisco Bay Area, also called Silicon Valley, California, US, which hosts headquarters of IT firms like Apple, Facebook, Yahoo, HP, Oracle, eBay, Paypal and Cisco, are Indians. Mr. Modi needs to create a task force to assemble brains from the US and other countries as well as from Indian premier institutes like IITs to achieve the goal. India can spend tens of billions of US dollars on it because it has potential to eliminate hundreds of billions of dollars from each year import bill. For this purpose, India should not support start-ups which would create few billionaires like Elon Musk (Tesla), but instead use the “Codetermination” industrial policy of Germany. Comptroller and Auditor General (CAG) office needs to evaluate the work periodically, say every three or six months, as per agile project management principle (read: The Agile Movement) to make sure that money is being spent properly. Like the Europeans, the Indian government needs to provide the world-class transportation facility, like metros, in large and mid-size cities so that people would use them instead of autos. In US, middle-class and upper-class family own more than two cars which they prefer to use to go to office and shopping whereas Europeans prefer to use public transportation for these purposes. In 2010, Americans drove for 85 percent of their daily trips, compared to car trip shares of 50 to 65 percent in Europe. Longer trip distances only partially explain the difference. Roughly 30 percent of daily trips are shorter than a mile on either side of the Atlantic. But of those under one-mile trips, Americans drove almost 70 percent of the time, while Europeans made 70 percent of their short trips by bicycle, foot, or public transportation (read: 9 Reasons the U.S. Ended Up So Much More Car-Dependent Than Europe).
(Source: http://w3.siemens.com/topics/global/en/electromobility/pages/ehighway.aspx)
