Today, India does not figure on the list of the fast growing economic growth engines of the world. It remains stuck in the cliché of being a “very promising emerging market”. Just by comparing various simple parameters it can be seen that India has been the biggest disappointment amongst the growth stories of the BRIC economies.
Need for a revolution
As one of the world’s most crowded countries, India has seen its two decades of economic reforms from 1990 to 2010. The current decade is the most critical to sustain the momentum and overcome the daunting challenges of its populace and infrastructure upheaval. The ecosystem is not helping the cause. Population growth stabilization is not on the agenda and as the human mass accumulates new challenges in managing the scarce environmental resources and providing sustainable living looms ahead.
— Raju Narisetti (@raju) January 23, 2014
An Economist Intelligence Unit in its “where-to-be-born index” ranks India very low at number 66 by analyzing factors based on a child born this year reaching adulthood in 2030. So a child born in India today will not have a very bright future and this inspite of today’s India having more than 50% of its population under 25 years of age. So despite the feeling of dynamism and the buoyancy, of high growth in disposable incomes and expanding cityscapes, there are warning signs glaring in the face. Today, national infrastructure is stretched to its limits, the need of the hour is a radical revolution to make cities more livable, upgrade the rural economies and cater to the future energy and water needs. The growing population of the future will demand education, job opportunities, vocational skilling, and health facilities. Is India doing enough today? Maybe not!
— Financial Times (@FinancialTimes) January 31, 2014
A frozen economic model
Post-independence and moving away from the agrarian economy, India chose to base its new model on the services sector and this has definitely paid rich dividends. With the first-mover advantage, the highly-skilled talent pool and of course lower costs, India became the world’s favourite back office. Today, smaller Asian countries like Philippines, Malaysia, Indonesia and Vietnam are challenging India’s might and drawing away the services sector business. India’s development as a knowledge hub with a huge talent pool and business in the export of services is complete. This decade needs to quickly focus on a concerted effort to move the growth model from the services sector to the manufacturing sector just as it happened from the agrarian to the services sector between in the fifty years from 1960.
The “Swadeshi” movement in India during the independence struggle with the British was an economic strategy focused on self-sufficiency by boycotting British products simultaneously reviving manufacturing and consumption of domestic products. In a globalized world, it is undoubtedly selfish to revert to these techniques. But as the adage goes “what goes around comes around”. The Indian market is large, growing and in many ways unsaturated. To insulate it from global economic variations, and currency fluctuations it is time to think “swadeshi”. Impetus on manufacturing locally and creating of more industries in every domain should be encouraged and this should be the mantra for this decade and leading to the next one. The political class and the corporate world are echoing this sentiment but talk needs to move to action. The National Manufacturing Policy with the objective of enhancing the share of manufacturing in GDP to 25 percent within a decade and creating 100 million jobs should be imperatively achieved. In this rapidly globalizing world and highly competitive economic scenario, there will be no second chances.
It is critical that a rapid urbanization drive should be the starting point. Of course this combines infrastructure development, provisioning education, health and energy requirements of the growing population. This should be complemented by a pro-reform agenda with a key focus towards policy, institutional and governance reforms. These reforms would help convert India into a global platform for labor-intensive manufacturing production which is essential for the next decade of growth. The India story is intact and this intermediate phase is what characterizes the deceleration in its growth cycle. Surely India can and will continue to grow at high rates of economic growth which can be far more inclusive than what it has been over the last few decades.
By Shashikant Vaidyanathan