The velocity is amazing. It has just taken a shade more than
a decade for Vietnam to double their Percapita GDP. The income levels are
rising faster in emerging economies and countries outside the BRICS may
outperform the rest. Especially Asian economies like Thailand and
Indonesia along have been performing tremendously. This is despite
the slow down on account of the global crisis.
With new Government in force with complete majority, the
feel good factor has come back for India. The New Prime Minister with
aggressive style has promised to bring back Brand India image and assured to
roll our policies and reforms which can focus on development. It’s really
welcome that he has benchmarked to catch up with China in growth, though it may
be an herculean task given the kind of repair work the economy needs.
While the positivity’s surrounding the revival of India is real
and we can believe strongly that the growth rate of around 7% will be achieved in
next two years, the greatest challenge is to make capitalism inclusive. Dr Vijay
Govindrajan, a distinguished Professor at Dartmouth College’s
Tuck School of Business famously talks about Compassionate Capitalism
which can make every individual part of the growth story.
The high growth in the previous cycle was skewed and the
rich –poor gap widened despite India becoming a 2 trillion economy. With the average age of Indian today being 25,
the demographic advantage will have to be leveraged and empowering the young Indians can
only enable the economy move from 2 trillion GDP to 10 trillion GDP within few
decades.
If India has to accelerate its growth and outperform China,
it has to double its Per Capita GDP in a decade’s time. India has taken around 15 yrs to double its GDP.
WE - Water and Energy are the catalyst for growth.
Energy Security:
The challenge comes from Energy security. Most of the
country's financials are drained on energy imports and this can continue to be
a dampener for aggressive growth. Self sufficiency can be a game changer and
India has to think out of box to become energy sufficient. Dr Vijay
Govindarajan suggests focusing on Nuclear Energy from Thorium. Dr Abdul Kalam had
also mooted the idea years back and its a clean energy available in abundance
in India.
What Shale has done for US recovery, Thorium can do for
India. If we can get away from the clutches of fossil energy it can do a world
of good for the country, as our debt to GDP can come down sharply, leaving the
entire cash for inclusive growth.
Water Security:
The second key challenge is availability of
Water. The new government talks seriously on linking of river. If they walk the talk on river linking, that can transform the agricultural sector in a big way.
Flooding and drought has been perennial for both north and south and if India
can find a balance on water resources, the rural India can leap frog on
agricultural growth. This can bring down inflation which again will strengthen Indian
financial system.
Energy and Water security are critical for the economy to
have that much more cash in the system to create the velocity needed to double
the per capita GDP of the country. With
over 600 million people expected to move up the consumption pyramid, the demand
side GDP can be explosive. Enough financial resources are needed to accelerate
the supply side to match the demand or else the demographic advantage can just become
a disaster.
The key long term strategy has to be, to make India Energy
and Water sufficient to achieve inclusive growth. If we do not focus on this, we
may get back to 8% growth, but then the real people empowerment may not be achieved.
Marggo India
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