India is the second most populous country, with over 1.3 billion people or about one-sixth of the global population. We are projected to be the most populous nation by 2022 and the population is expected to reach 1.6 billion by 2050. More than 50 per cent of people are below the age of 25, and in 2022 the average age will be below 30. Powered by the intellect, energy and creativity of a young nation, India is certainly poised to grow rapidly.
The journey has challenges and growth is by no means guaranteed. But with concerted efforts I believe equitable, sustainable growth is achievable and India can build shared prosperity for all citizens by transforming the way the economy creates value. I do not intend to link the economic situation or its solution to any political dispensation; but as we cross 18 months of the present government and edge towards the end of 2015, this is a suitable time, both to reflect and take our journey forward.
An act of faithFor sure, things were not good in June 2014. Growth had slowed; the world was also slackening. India faced a wide range of governance issues which,
All governments followed policies of promoting foreign direct and institutional capital inflows, and exhorting domestic businesses to invest at home. No one, whether then or now, denies the attractiveness of India as a long-term and growth market.
But at its core, investment remains an act of faith. Business attractiveness is a necessary but not sufficient condition for an investment destination; systemic trust is critical for undertaking risk. Today, much comfort stems from government functioning with a greater sense of purpose, never mind even if the political environment forces it to keep articulating its balance between being pro-business and pro-poor. It is ultimately sound commerce that can provide livelihoods.
Energising an economy that had been slowing for over two years was a Herculean task. But regardless of the views one may hold for the range and speed of actions, one cannot fail to concur with the government’s emphasis on doing what’s right for India. Broadly speaking, one perceives the pursuit of a three-pronged strategy of nurturing the economy, enhancing India’s global profile and standing, and attempting to improve daily lives of citizens. Only some actions yield quantifiable outcomes, others can build positive perceptions when all actions are relentlessly pursued and executed.
Looking inwardAs always, external examination and internal reflections are two sides of the coin. One must worry if these generate widely dissimilar conclusions; thankfully, this is not so in India’s case.
The external viewpoint — whether of foreign governments, economists, investors and foreign investors doing business here — is overwhelmingly positive, be it on growth, policy direction or stated political will to reform the economy and generate livelihoods. Of course, they also feel that decisions and actions must move faster; but outsiders definitely recognise the limitations of a notoriously creaky implementation machine and of a noisy federal democracy.
For the domestic viewpoint, it is important to recall that local businesses have literally been on an economic rollercoaster since about 2012. They are, therefore, tottering under multiple pressures of capacity and debt overhang, poor exports and increased competition from imports. They need to survive the turmoil in one piece; therefore mindsets remain strained and negative.
In a recent India Risk Survey, concerns on governance seem to have taken a backseat, which is great. However infrastructure spending not having reached the ground in a big way (it is reported to be on the verge of doing so), and continuing weakness in the rural economy have amplified woes.
In our capital-scarce economy, banks must play a vital financing role in fuelling future growth and investments. Enough has not happened yet in terms of strengthening the banking sector and the “soft” impact of the atmosphere created by bad loans and borrowers is also bound to ensure tough “after-effects” for borrowers.
Reading successWe must also be aware that many actions widely seen to be generally successful (coal and spectrum auctions, revival of stalled road or power projects) may in hindsight really be “qualified successes” in light of the weight and enormity of the larger agenda.
All this may leave some with a haunting feeling that the government has “not done enough” — and that expectations may continue to run ahead of realities. Let us not forget we live in an era of mouse clicks, where patience is a discounted virtue. It cannot, however, be denied that the economy is more stable than before; inflation tends to be lower, fiscal and current account management are better, GDP numbers are decent.
The storyline must shift from “what is not happening” to equitably analysing real impacts; it is important that supporting evidence derives from a wider base which includes corporate performance, industrial production, health of the agricultural sector, and timely delivery on infrastructure. Without these, the economy is just not creating sufficient employment openings.
Ficci reasoned in May 2014 that tangible outcomes could accrue over the next18-24 months, based on a mix of short-term hits and long-term fixes. In the run-up to the next Budget, policies and implementation properly showcased and articulated will multiply confidence. The actions of the next three months could shape the rest of the government’s tenure.
In the Mahabharata, the venerable Bhishma articulated the philosophy that if a house collapses in the rain, the fault lies with the dwelling (due to its own weakness) rather than the rain (which influences all houses). However this well-founded perspective provides no comfort to businesses (ranging from the large to many thousands of small and micro entities) and people looking for greater livelihood opportunities and awaiting a better prioritised policy-cum-delivery environment.
This column explores ideas and opinions on Indian enterprise and economy. The writer is an entrepreneur and former president of Ficci. The views are personal