The Indian economy turned around after 2003 (10th five year plan) clocking a growth rate of around 8.6% p.a based on industrial recovery, a continuous and sustained growth in services especially construction and business services and growing exports in world trade. The question that comes to my mind is that in the wake of certain changes in the economy, can India make it once again?
By comparing the 2003-2007 boom with the present scenario, can we say that the picture of a lion in Make in India campaign will bring prosperity for the country? Trust me there are certain reasons to believe that this miracle can happen.
The luck has come to India in the form of lower oil prices. Seizing the opportunity provided by global price of crude oil falling to less than $50 per barrel, India is planning to fill up a strategic storage facility at Vizag. This is the first time the country is planning to store crude oil to about 1.03 million tonnes. This will not only boost domestic industries, but also help India to export their goods in international market at cheaper rates, leading to increase in its share in total world’s export.
As regards oil prices, the net impact on India will be positive because we are still a net importer country and this leaves us with less burden on foreign exchange reserves. Increased export along with cheaper oil imports will not only bring the necessary foreign exchange reserves to the country ,but will also keep inflation in check.
The Indian economy has the power to emerge as a great economic power in the long run only when it is able to exploit the demographic dividend and opportunities properly.
Secondly, the current easing of monetary policy by RBI ( reducing Slr to 21.5% and repo rate to 7.75 ) will increase bank’s lending to productive sectors on competitive terms so as to support investment and growth.
Thirdly, the cooling of the Chinese economy may provide a cushion to Indian economy to be at par with them. The decline in China’s export to Europe and U.S and a fall of domestic demand in China has done worst to Chinese economy. There is a continuous fall in their GDP growth quarter after quarter. With the revision of new base year to 2011-2012 from 2004-2005 and method of estimating GDP has already placed India at par with China and is expected to become the fastest growing economy by 2016-2017.
Fourthly, the make in India campaign launched by our Prime Minister Narendra Modi, is a welcome move aimed at making India a manufacturing hub. The program is designed to facilitate inward investments and build nation’s manufacturing infrastructure. It also includes plans to make business-doing easier in India, more effective and transparent. Currently, India is at 142th rank in ease of doing business index, but if things go well then our country will surely achieve the ranks of developed countries.
Fifth, the implementation of GST – goods and service tax is likely to improve tax collection and boost India’s economic development, breaking tax barriers between states and integrating India through a uniform tax rate. It is estimated that India will gain $15 billion a year by implementing GST as it would promote exports, raise employment and boost growth. The price is likely to come down. Lower prices will increase consumption and thereby boost industries to produce more.
Sixth, India spends only 1% of GDP on healthcare. Mind you, a healthy economy is a wealthy economy. The share of healthcare in GDP should be increased to atleast 2.5% and major focus should be given to primary healthcare. Amartya Sen articulated that there should be ‘ Right to healthcare‘ too, just the way we have the Right to Education. Not to forget, only a healthy and skilled workforce can boost economic development of a country.
To sum up, I would like to say that the luck is in favor of India. “We have reached the outskirts, now it’s the time to enter the woods”. We have to exploit the opportunities that we have at the earliest. If we can manage to keep the saving rate higher and if oil prices can stay at these levels for few months then we could achieve a high voltage growth for India. The Indian economy has the power to emerge as a great economic power in the long run only when it is able to exploit the demographic dividend and opportunities properly.
‘Growth’ is a part of development, not a synonym of development. Indeed, The Indian economy can emerge as a great economic power in the long run but with the cost of cultivable land, freedom etc. Today JEAN DRÈZE has written in “The Hindu”, for your reference: http://www.thehindu.com/opinion/lead/nehruvian-budget-in-the-corporate-age/article6959755.ece
@kashif – Thanks for your appraisal. But I just talked about the possibilities for India to achieve the same growth trajectory which it did during 2003-2008. Everything has something good and something bad for the economy. We have to do the cost benefit analysis before reaching to a point. I agree with your words that it would be too early to judge the effect of different policies of govt which I mentioned in my article. However, if you see clearly my article, I have mentioned that India can become great economic power only when it is able to exploit the available opportunities and demographic dividend efficiently.