Can India realise its economic potential?


The Indian economy is operating far below its potential. We need governance, judiciary and economic reforms to propel India to the top

The Indian nation is at a crossroads. While the world is going through a period of undeclared economic recession, exacerbated and complicated by Covid-19 and now the protracted war between Russia and Ukraine, India’s economy is resilient and growing the fastest. But our economic progress is far below our true potential.

India is a gifted nation in terms of natural resources, but even today the inherent potential for explosive economic growth is woefully small. Our bureaucracy with vertical hierarchy is by far the worst for the administration. It is exploitative and gives the senior members more authority and less accountability. This type of bureaucratic structure was devised by the British to continuously plunder India and unfortunately this structure is followed by the existing governments even seven decades after independence.

We certainly don’t see the best in our PSUs, which make up 15 percent of our economy but are a key driver of small and medium business growth. The government has also been unable to increase the operational efficiency of these companies – thanks to a rather callous and apathetic attitude towards them, which led to plans to divest some of them. This came in the wake of the frequent cliché heard during the Modi government’s current tenure – that the government has nothing to do with business.

READ:  The Surging Hydrogen Economy That Oil And Gas Companies Are Tiptoeing Into.

The impact of the wrong governance structure isn’t limited to PSUs. They seeped deep into the private sector business houses they controlled and the entire cluster of SMEs they governed.

Despite what the ruling NDA may say, the government is also in business – the governance. And the business of government requires the management of people, materials and money – just like any other for-profit business. Yes, the governance business is not for profit. But it uses essentially the same techniques and methods used in the commercial world of profit. It takes perseverance, honesty, transparency and accountability to serve its purpose well. It takes professionally solid, foolproof systems that establish discipline and efficiency. It takes economic and fiscal discipline. It cannot serve its purpose well with grandiose public welfare systems and social services. There is no such thing as free lunch, not even in government business.

Changes and reforms, no matter how well-intentioned, will only produce positive results if the laws and mechanisms for implementation are adequate. These are the precise reasons behind the government’s failure to attract foreign direct investment and Indian private sector investment to Make in India. Unfortunately, the Swadeshi train was pulled by RSS and foreign companies like Amazon continued to gobble up the domestic retail sector, shuttering retail stores in large numbers.

READ:  The Trade-Offs Of Green Energy Measures

Speaking of the archaic laws and administrative systems in India, it must be mentioned that these are also the reasons behind the slow growth of infrastructure, which is characterized by low private sector investment in it. The outdated Land Acquisition Act, Indian Police Act, Civil Service Act, Indian Penal Code etc. were never designed to serve the interests of a sovereign India and will need to be recast sooner rather than later.

Therefore, we must create enduring systems and processes that create discipline, increase efficiency, and deliver results for our nobly intended changes. Such systems and procedures can only be built on the basis of proper country laws, which in turn are based on sound economic principles without regard to populism and political expediency. The structural and administrative changes proposed above will give a quantum boost to domestic manufacturing, which is the engine of economic growth. They will rapidly increase India’s manufacturing share of GDP, which has fluctuated at 15 percent over the past 10 years.

READ:  stock market outlook: Stability in US markets could bring FIIs back to India: Vinod Nair

If we look at China as an economic competitor, it should be clear that today the average cost of goods and labor in China has risen to six times that of India. The Chinese government’s actions have led to a major debt crisis, which is a huge drag on growth. India is now in an advantageous position in terms of manufacturing cost competitiveness with China. This offers India an opportunity. There’s never been a better time to do it.

Many strategic steps can be suggested to boost India’s economy in different sectors. Investments in value-added food and agricultural products, in our traditional health system Ayurveda and in tourism will pay off richly given their potential in the current global scenario. But the bottom line is that we need to reform our administrative and judicial systems in line with the radical constitutional reforms mentioned above. With such changes, we will quickly see a new India emerging that would be the leading economic superpower – and not for the first time in world history.

(The author is a management consultant and freelance writer on topics such as economics, development and governance. The views expressed are personal.)



Source link