India’s GDP growth rate has to log a sustained, double digit for the next two decades to transform itself into a developed nation by 2047, say Dr Rajan and Lamba, two noted economists.
The Prime Minister’s vision to see India grow rapidly during ‘Amrit Kaal’ and emerge as a developed economy by 2047 is a good goal.
But, the current average growth of 6 % is highly inadequate to achieve the desired goal. The per capita income will not rise commensurately and people will not be rich or good enough. It is a tough ask but proper, long term strategies and practical solutions can help achieve it, the former RBI Governor said at an event organised by Manthan at the Muffakham Jah Engineering College, recently.
Failing to achieve higher growth rates will mean the risk of the country losing its great ‘Demographic Dividend’ (over 60% of population is between 15-35 years and in their most productive phase of life). On top of it India will face a bigger challenge around 2047 of serving an additional, huge population of the aged, the duo who have penned a book titled Breaking the Mould: Reimagining India’s Economic Future, warned.
India’s path should be different
The two economists suggested that India should follow a development model, pre-dominantly based on Services as a recipe for the country to achieve accelerated growth. Services is both labour intensive and lucrative. Most rich economies at present are services driven.
So far, India’s showing in the services sector has been impressive and there is surplus, youth manpower that can be quickly trained and turned to exploit the opportunities that new and emerging technologies are offering.
Dr Rajan and Dr Lamba identified key factors like handling higher education, agriculture, malnutrition among children and women, unemployment, engaging with western industries and political stability through democracy that need to be urgently fixed.
“The China model of manufacturing led economic growth is not for India. China got the manufacturing game earlier and has a stronghold. The world is not ready for another China with 1.4 b population,” they recommend.
Responding to questions, Rohit Lamba said, “China, unlike our perception is very decentralised in their business development. Though controlled by the Chinese Communist Party, there are many mayors competing to get foreign investments. Sometimes 4 are there from different regions bidding too.”
Labour arbitrage in manufacturing for India is gone with cheap markets emerging but exists in services still. India has the cost advantage here. Protectionism is on the rise with countries wanting to have manufacturing of their own, they said.
Services sector creates a lot of jobs compared to manufacturing, which has not created many jobs in the last few decades. But, that does not mean we don’t invest in manufacturing which we also need also, they argued.
Dr Raghuram Rajan, RBI Governor between 2013 and 16, is with Chicago University’s Booth School of Management while Rohit Lamba id with the Pennsylvania State University.
The Apple-Foxconn example
Giving an example of the Services Vs Manufacturing models, Dr Rajan said the last product Apple manufactured was in 2004. Thereafter it is the Supply Chain Management model that got Foxconn to manufacture its products.
Now, if you compare their size on any good day, Apple is valued at 3 trillion dollar while Foxconn stands at $50 billion that is 6 times to the manufacturer.
India challenge and way forward
So, what do young people want in India today—jobs, jobs and jobs. “The challenge is to find enough jobs for the millions of youth now and find youth for the millions of jobs that are being created by new technologies like AI, Robotics, Genetics and Data,” Dr Rajan said.
AI has huge potential but its impact will take some time. India has an advantage in most emerging technologies because 58% of web based applications are in English.
India’s biggest asset is its Democracy and not just English. Unlike China, Vietnam or Philippines etc. which don’t have both.
Governance issues
But, going forward India has to fix its governance issues. Decentralisation is needed instead of too much of centralisation. The governance should be directed to give people what they want. No free giveaways as far as possible, they said.
The second important issue is improving the human capital. Not just skilling but also health. At present 35% of children suffer from malnourishment. By 2040 these kids will be in the workforce with a handicap. Similar is the case with women, who need to be skilled and their health taken care.
The third aspect is the focus on creating the right ecosystem for entrepreneurship. Giving an Indian example, Dr Rajan narrated the story of P C Mustafa from Wayanad in Kerala. The son of Rs 10 earning daily wager, Mustafa struggled hard to study in NIT and IIM and finally took to entrepreneurship and set up iD Fresh Foods (ready to eat packaged foods) in 2006 and grew it to Rs 3000 crore revenue enterprise.
The second example he cited was one of the founders of Agnikul Cosmos, the space startup in Chennai. Srinath Ravichandran, an alumnus of the University of Illinois, Urbana Champaign always nurtured a passion to become an Astronaut but was a bit old for it. He saw Elon Musk’s meteorite rise with Space X in the space business and wanted to build rockets.
Back in India he connected with an ISRO scientist who said yes, we can do it. Srinath joined hands with Moin SPM, Sathyanarayan Chakravarty and Janardhan Raju to launch Agnikul in 2017.
Agnikul launched
With their headquarters in the IIT Madras, the company got into 3D printed rockets that can send satellites to 400 km-LEO (Low Earth Orbit). It secured huge private equity funding and support from the ISRO and is well on its journey of success.
The discussion was moderated by C Rammanohar Reddy of Manthan and former editor, EPW and Associate editor, The Hindu. Vikram Mamidipudi, one of the founding members of Manthan, said it has been a long wait to get Dr Raghuram Rajan to address Manthan since 2012. Dr YV Reddy, former Governor of the RBI (who also attended ) had also written and Dr Rajan had agreed but made it finally now. The meeting was well attended
| 
