Avik274
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India is well on its way to becoming a $5 trillion economy by 2025 (and thus the third largest on this planet after China and the US). By 2018, it will overtake Britain and become the largest economy in the Commonwealth.
The first trillion took India 60 years post-Independence, the next trillion will happen in another 10, and the next three trillion can happen in yet another 10 years!
A tide of rising expectations has pushed the sensex up from 21,140 on January 1, 2013 to 27,499 as the year ends, an almost 30% increase (in comparison FTSE 100 dropped by 6% over the same period). And a stunning minimum support price decrease, not increase, of 0.3%, coupled with favourable oil prices, will hopefully push it up next year as well.
?However, there are significant policy and structural issues to overcome on this journey. Growth can happen in case of a triangulation of good policy and reforms, increased globalisation and political stability and will at the Centre. With a single party now in power in about 2/3rd of India's states it should be easier to nudge them on state-level reforms, where much of the action is expected.
India needs tonnes of growth in the years ahead, starting with 6% per annum and going up to 10% and more for at least two decades, for its per capita income to rise significantly and leave poverty behind. Gazing into the crystal ball, what does India need to do in 2015 for laying the foundations of this mega growth? India remains one of the least globalised economies in the world even after two decades of economic reforms. Pankaj Ghemawat's Global Connectedness Index shows India at 126th out of 140 countries ranked. While some of this can be explained by India's large domestic market, having only 17% of our GDP accounted for by merchandise exports and 8% by services exports is frankly nothing to write home about.
Falsely attributing domestic weaknesses to globalisation forgets the fact that it would open up significant opportunities for domestic firms to do business overseas as well.
Infrastructure investment as a percentage ofGDP is stagnating at 6% and the PPP model is broken. Thus, despite lakhs of crores of stalled projects being cleared, there is no dramatic increase in the size of the order books for capital goods or construction. The latest round of bids for ultra-mega power plants and roads saw zero or close to zero bids, highlighting inherent risks in the sector.
Aggressive bidding and a race to the bottom in pricing, coupled with huge land acquisition issues and non-existent cash flows, led to project economics being turned on its head and the sector going into deep red. India's corporate debt ratios are the highest in the world today and infrastructure has contributed a fair share to that.
Trimming 'bad' subsidies and unproductive expenditures to free up cash flows for investment, perhaps even a breach of fiscal deficit to 4.5%, may be the way forward or else the sector will remain moribund.
E-procurement platform backed by a strong legal mandate makes Karnataka a leader in this space and does a turnover of about $18 billion annually. Why can't government of India adapt this or any better variant and legally mandate that all tenders especially railways and road contracts must go through it? This should have a salubrious effect on bringing down corruption and enhance efficiency. Likewise income tax and corporate tax payments, which are now being done through MobileOne, should be extended nationally, to make payments easier and increase tax revenues.
Digital India should look at connecting every single panchayat using VSATs, subsidising expenditures through targeted advertisements from private and public sectors. A Hindustan Lever or a Maruti will happily pay for say an hour of ads in exchange for 23 hours of connectivity via VSATs or where possible, broadband via cable networks.
If Aadhaar-based direct cash transfers become a reality it will be a significant step forward in improving India's ease of doing business rankings where it has slipped down to 142nd rank on the World Bank scale (out of 189). A simple way to open and close companies with minimal documentation — by bringing Registrar of Companies nationwide on a mobile app, and giving deemed approvals if they don't come within a month or so — will not just help the ranking but will also have a credible signalling effect.
India's $86 billion IT exports (which have increased almost 12 times in as many years) still capture less than 10% of the global IT spend, while total tourist arrivals into India stand at 6.8 million (whereas New York'sCentral Park alone gets an estimated 40 million tourists) every year. These are just two examples of where there is significant headroom available for growth to happen.
India is standing at the proverbial cusp of being a middling also-ran eco-nomy and a great economy. As it starts the next decade of its journey towards a $5 trillion prize by 2025, steps today will determine the complexion of the journey and indeed the destination.
www.economictimes.com/news/economy/policy/india-well-on-its-way-to-becoming-a-5-trillion-economy-by-2025/articleshow/45714749.cms?curpg=2
The first trillion took India 60 years post-Independence, the next trillion will happen in another 10, and the next three trillion can happen in yet another 10 years!
A tide of rising expectations has pushed the sensex up from 21,140 on January 1, 2013 to 27,499 as the year ends, an almost 30% increase (in comparison FTSE 100 dropped by 6% over the same period). And a stunning minimum support price decrease, not increase, of 0.3%, coupled with favourable oil prices, will hopefully push it up next year as well.
?However, there are significant policy and structural issues to overcome on this journey. Growth can happen in case of a triangulation of good policy and reforms, increased globalisation and political stability and will at the Centre. With a single party now in power in about 2/3rd of India's states it should be easier to nudge them on state-level reforms, where much of the action is expected.
India needs tonnes of growth in the years ahead, starting with 6% per annum and going up to 10% and more for at least two decades, for its per capita income to rise significantly and leave poverty behind. Gazing into the crystal ball, what does India need to do in 2015 for laying the foundations of this mega growth? India remains one of the least globalised economies in the world even after two decades of economic reforms. Pankaj Ghemawat's Global Connectedness Index shows India at 126th out of 140 countries ranked. While some of this can be explained by India's large domestic market, having only 17% of our GDP accounted for by merchandise exports and 8% by services exports is frankly nothing to write home about.
Falsely attributing domestic weaknesses to globalisation forgets the fact that it would open up significant opportunities for domestic firms to do business overseas as well.
Infrastructure investment as a percentage ofGDP is stagnating at 6% and the PPP model is broken. Thus, despite lakhs of crores of stalled projects being cleared, there is no dramatic increase in the size of the order books for capital goods or construction. The latest round of bids for ultra-mega power plants and roads saw zero or close to zero bids, highlighting inherent risks in the sector.
Aggressive bidding and a race to the bottom in pricing, coupled with huge land acquisition issues and non-existent cash flows, led to project economics being turned on its head and the sector going into deep red. India's corporate debt ratios are the highest in the world today and infrastructure has contributed a fair share to that.
Trimming 'bad' subsidies and unproductive expenditures to free up cash flows for investment, perhaps even a breach of fiscal deficit to 4.5%, may be the way forward or else the sector will remain moribund.
E-procurement platform backed by a strong legal mandate makes Karnataka a leader in this space and does a turnover of about $18 billion annually. Why can't government of India adapt this or any better variant and legally mandate that all tenders especially railways and road contracts must go through it? This should have a salubrious effect on bringing down corruption and enhance efficiency. Likewise income tax and corporate tax payments, which are now being done through MobileOne, should be extended nationally, to make payments easier and increase tax revenues.
Digital India should look at connecting every single panchayat using VSATs, subsidising expenditures through targeted advertisements from private and public sectors. A Hindustan Lever or a Maruti will happily pay for say an hour of ads in exchange for 23 hours of connectivity via VSATs or where possible, broadband via cable networks.
If Aadhaar-based direct cash transfers become a reality it will be a significant step forward in improving India's ease of doing business rankings where it has slipped down to 142nd rank on the World Bank scale (out of 189). A simple way to open and close companies with minimal documentation — by bringing Registrar of Companies nationwide on a mobile app, and giving deemed approvals if they don't come within a month or so — will not just help the ranking but will also have a credible signalling effect.
India's $86 billion IT exports (which have increased almost 12 times in as many years) still capture less than 10% of the global IT spend, while total tourist arrivals into India stand at 6.8 million (whereas New York'sCentral Park alone gets an estimated 40 million tourists) every year. These are just two examples of where there is significant headroom available for growth to happen.
India is standing at the proverbial cusp of being a middling also-ran eco-nomy and a great economy. As it starts the next decade of its journey towards a $5 trillion prize by 2025, steps today will determine the complexion of the journey and indeed the destination.
www.economictimes.com/news/economy/policy/india-well-on-its-way-to-becoming-a-5-trillion-economy-by-2025/articleshow/45714749.cms?curpg=2
