Sep 20, 2004|
India: Recipe for growth
If one were to ask what is the recipe for India's economic growth, the common answers would be -
Growth in agriculture, led by good monsoons, and/or
Growth in industries, led by strong demand, and/or
Growth in services
However, it is pertinent to ask 'how do we sustain economic growth over a long period of time?'
If one were to peep into history, there have been several successful strategies. For instance, Britain became the economic leader of the world in the 1800s by pioneering the industrial revolution. This included inventing steam engines and railroads, and emphasizing free trade. On the other hand, in the mid-1900s, Japan made its mark on the global economy by first imitating foreign technologies, protecting domestic industries from imports and then, developing tremendous expertise in manufacturing and electronics.
Now, even though their individual paths may differ, all rapidly growing nations share certain common traits. The same fundamental process that helped Britain and Japan, as mentioned above, seems to be now at work in the developing nations like India and China. While China seems to have taken a momentous lead over India, the latter (India) seems to be gathering pace. We can definitely move into a higher economic growth trajectory provided we are able to continue with the current momentum of reorganization of our economy.
The three wheels of growth
The engine of sustainable economic progress depends on the three wheels of growth, no matter how rich or poor the country is. Let us study these three factors and understand how India fares on each of them.
Human resources: A country might buy the fastest of computers and the most sophisticated of engineering equipments. However, these can be used only by skilled and trained manpower. This is indicative of the fact that apart from quantity, the quality of manpower plays a major role in a country's long-term sustainable development. India is blessed on this front. India boasts of a talented pool of human resource that is a result of the country's long-drawn approach towards consistently improving its high quality technical education system. However, to sustain this competitive advantage, elementary and primary education standards need to be improved dramatically. We need a political vision for the same, which has been lacking for some time now.
Natural resources: Countries like Canada, New Zealand and Norway have been able to grow primarily on the back of their natural resource base (agriculture, fisheries and forestry). India seems to have done its bit on this front. We are the world's largest exporter of certain food items and precious metals. However, where we seem to have lacked is in the development and proper utilization of our resource base. Nurturing private-public sector partnership could be one way to utilize these natural resources more efficiently.
Capital formation: In the twentieth century, the developed nations focused on attracting capital towards investing in roads, irrigation and power plants. This not only improved infrastructure facilities but also improved productivity. Now, many are of the belief that computer technology and information superhighway will do for the twenty-first century what railways and highways did for the previous one. However, services is not 'the answer' to job creation from the long-term perspective. Manufacturing and agricultural reforms are extremely critical.
While the above three wheels of economic progress are necessary to sustain growth for any country, they are all the more important for developing nations like India. Also, if India has to move towards a higher and sustainable level of economic growth, political vision is of paramount importance. In that case, investors in the Indian growth story do have to take a long-term approach to investing. Therefore, it is important not to get carried away. We still have a long way to go.
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