India: The World’s Next Growth Engine – Fact Or Fiction?

Day 2 at the World Economic Forum in Davos was still about India for me, and it’s hard to ignore the weight of expectations on us. As I made my way to the Congress Centre through the morning mist, I was still trying to clear the fog shrouding my thoughts as I visualized India as the World’s Next Growth Engine. Should this proposition be moved from being a Question to a Full Stop? I indeed invite your opinions on that. I mean, if we see the Global Economy as a keen observer (not a very comfortable thought) then they need to understand a few things about us first. Even though India was able to partly defy the global economic malaise in 2001, 2008 and 2015 to some extent, we are not really insulated. The country needs a facilitating economic environment within which to grow unfettered. And that’s not even counting the various domestic economic and political issues we drag along in our baggage cart. Among many other factors, one aspect which can decelerate us is the overly high burden of non-performing assets (NPAs) with India’s nationalised banks. Are the government’s efforts to dilute them on our stock markets in order to meet re-capitalisation metrics a solution? Definitely another point wide open to debate. Also, we need some really quick fixes. Let’s for a moment think of India as a massively extended version of the village of indomitable Gauls, immortalized by Goscinny and Uderzo in the Asterix comics. The village druid Getafix had a magic potion which could instantly infuse superhuman strength. The magic potion India needs today is the Goods and Services Tax (GST) Bill. Will this magic fix be served up in the upcoming Union Budget? I certainly hope so. Jaitley mentioned that “We are a noisy democracy, but things do get done.” Goscinny and Uderzo obviously never envisioned India’s Upper and Lower houses of Parliament, but Jaitley’s statement does bring to mind how the village of extremely raucous Gauls conducted most of its business. With the upcoming change in the constitution of Upper House this year, the ruling party may get a majority – and the new members could favour the GST. Hopefully, this will enable the government to implement it as well as other important bills such as the Real Estate (Regulation and Development) Bill and the Land Acquisition, Rehabilitation and Resettlement Act. Mark Tully’s write-up on ‘No Full Stops for India’ was mentioned, and we might have indeed reached a stage where most question marks have to change to full stops. That is solely because of three growth engines: manufacturing, services and agriculture. The first is easy to comprehend - in the next decade, manufacturing’s current contribution of 15% to India’s GDP will go up to 25%, if the proposed structural reforms are indeed forthcoming. 55% of our population is still engaged in agriculture, and this is now perceived as too large a slice - part of it should be deployed elsewhere. Maybe ‘Skill India’ is just the solution. But even in agriculture, we need to ensure better irrigation, lower dependence on the monsoon, and price parity for farmers by eliminating middle-men. Such measures have serious potential to prop our GDP by another 1.5 % in the coming decade. Lastly, a pertinent issue is the express need to improve the pace of decision making. With 29 states, India is already too fragmented when it comes to decision making and the Centre and States are rarely, if ever, on the same page. That said, many of India’s states are moving towards ‘Competitive Federalism’ (from erstwhile Cooperative Federalism), with renewed focus on road shows to attract investments. The pace of Chief Minister Chandrababu Naidu attending Davos with the single-minded intention of marketing Andhra Pradesh is a case in point. Exciting times for sure… and there is no better place and time than the annual World Economic Forum to gauge the new direction in which the winds of change are blowing.