People Empowerment : India's Private Responsibility can double the impact, than Public Spending

India is in a Cusp. The most crucial elections are around the corner and the biggest democracy has responsibility of mandating the leadership to take the economy back to growth trajectory. The biggest challenge is a clean mandate.

India cannot afford to have a prolonged anemic growth of around 5% with double of inflation, leaving the nation with lesser wealth and people with lower development.

According to a report from Mckinsey, Empowerment gap is around 4% of GDP which is substantial and the country cannot afford to have a laid back approach on the areas of poverty and people development.  

Some interesting data’s from Mckinsey report is highly relevant at this time as this can influence people on their judgments on who can be their next rulers.

·        India needs to add another 115 million new non farm jobs between now and 2022.

·        Over 500 million people can be empowered economically and over 70% increase in agricultural yield has to be achieved to meet the incremental consumption demand.

·        Around 270 million people will still be in below poverty line

·        India’s land productivity is just half of that of emerging Asian Countries

·        Over 80% of the manufacturing employment is arising from Tiny Sector and  MSME’s and their  productivity is at around 1/8^th with that of the large enterprises.

 

The stalled reform scenario, which has been the case in the last 5 years, if it persist, can deprive around 400 million people from empowerment. A lack of clarity on the part of the people to decide their rulers can be a great injustice to the majority who are living with lack of basic household needs or in poverty.

The demographic advantage can soon become a liability again if we do not go back to inclusive growth of over 7% and progressively move towards the 8% level on sustained basis.

More people will be getting out of poverty and more and more will be moving towards empowerment. Also millions of people will upgrade themselves to middle class level. All this will happen even if the economy grows at the stalled levels of around 5% leading to increasing levels of output gap resulting in prolonged inflationary conditions.

It is imperative that we get out of the cusp and start moving towards higher growth trajectory.

As much as it is depended on the policies and reforms, so much it is depended on the right leadership with larger vision and that much it is critical that the people of the nation apply their collective wisdom in choosing their leaders.

People Empowerment and Corporate Responsibility:

Eight basic household needs are deprived of the majority. Interestingly all the 8 can be business models targeting the impoverished and the private sector capitalist should look at this as opportunities.

Food : Energy : Housing : Water : Sanitation : Health Care : Education : Social Security

Around 12% of the country is under below poverty line and another 50 % of the population lacks above amenities.

Private Sector should invest on people empowerment and CSR can be a good avenue through which the development can happen. These organizations who invest into these people can have a sustained business model as the benefits out of such charities can come through increasing demand on a lag effect.

 

The most important factor is the conviction the corporate India has on such investment on people who are below the poverty line and those who are below the empowerment line. The country with upgrades on standard of living at the bottom of the pyramid can create a consumption boom over the longer period which will have a positive effect on their individual balance sheet.

 

The private sector has enough resources to focus on the upliftment of the marginal people and CSR can be a effective route towards raising the resources.

A delivery mechanism has to be created and again it opens up another business model and private sector can play a vital role in creating an excellent delivery model for the execution of the projects towards meeting the target of empowering the people at the margin

Currently some 50% of the public spending by the government on basic services does not reach the people on account of wastage, corruption and inefficiency. On a total spend of $90bn yearly on public spending around $45bn go waste which is a colossal loss of taxed resources.

The private sector should invest this $45bn on the empowerment of the people and show the result and take back the money as tax credits on the following years. Such incentive will motivate the private sector to come forward on such good cause.

Mckinsey report says policies helping on raising income levels have helped people move up on standard of living by 75% than the public spending through subsidies and freebies.

Its high time private sector should collaborate between CSR investors and the execution agencies for the purpose of inclusive growth and empowerment of people. A regulatory body consisting government and social institutions can act as a governing body to ensure transparency and seamless delivery.