Business Today

The long view, really

With the new government now in place for the last six months the country is impatiently waiting for the revival of the economy after several dismal years.
Aroon Purie        Print Edition: Jan 4, 2015
Aroon Purie, chairman and editor-in-chief, India Today Group
Aroon Purie, chairman and editor-in-chief, India Today Group

Our anniversary issue comes at a time when the big story in the country is the Economy. With the new government now in place for the last six months the country is impatiently waiting for the revival of the economy after several dismal years. It is, therefore, a good time for us to review the state of the economy and its future.

India Slowing
The economy's growing pains
At the risk of immodesty, we have been prescient both in calling out good times and bad. In February 2011, for instance, the chest-thumping over India's high GDP growth - averaging 9.35 per cent in the preceding four quarters - was still on when we put on the cover a story on how the economy had started decelerating.

Barring one, the GDP expansion numbers fell or stayed flat for the 12 quarters after that "India Slowing" cover.

In a recent cover story, we have pointed out that the economy seems to be turning around though a full recovery is still a year-and-a-half away. I am betting that we are right this time just as we were when we called the slowdown.

An India of change is before us. We have a ruling party with a charter for reform and a mandate to back it up. Expectations of a resurgent economy are high. There is no better evidence of that than the long queue of visiting global CEOs - Mary Barra to Jack Ma, Jeff Bezos to Mark Zuckerberg - and the scorching equity markets.

Business Today December 7, 2014 issue
Business Today December 7, 2014 issue
The first six months of the Narendra Modi government have not exactly set the economy on fire but Prime Minister Modi and his team should not be judged in haste. The Indian economy is a very distorted one because of the sins of the past. It will take time to get the sticky fingers of the government out of business and make it a market-friendly one, but the direction taken and the noises being made by this government are the right ones.

Already, there is some good news beginning to show up on our radars. GDP growth has been 5.7 per cent and 5.3 per cent in the April-June and July-September periods - the first time in 30 months that economic expansion in two consecutive quarters peaked over the five per cent mark. Retail inflation, measured by consumer prices, is 4.38 per cent, which is well below the target that the central bank has set for 2016, not just in the coming year. The stars are also favouring this government as crude oil prices have fallen to a five-year low with predictions they will drop further.

That set of headline numbers bodes well for India, for sure. But for growth to be sustained over several years and for the economy to be truly transformed into the powerhouse it has the potential to become, efforts need to be made to deal with multiple elephants in the room.

Different parts of the economy today have strong inter-linkages. Make a change at one end and you'll feel the effect at the other. Policies, then, need a much more nuanced and multi-layered view to make them effective. So, for this anniversary issue, we decided to take a deep dive into 21 issues, which, depending on what policy options we choose, will be transformative for India in the medium to long term.

Chosen right, even if some of the choices may seem contrarian, it will set the bearings right for the country as 1.2 billion Indians pin hopes on change. While zeroing in on the writers on each of these issues, we erred on the side of domain expertise over known faces. I daresay we made the right call. Sample these rich insights and prescriptions:

>> Banker K.V. Kamath argues that the high proportion of services in India's economy is a big advantage that, in the current day wisdom which favours manufacturing, should not be kissed away.

>> Private equity fund manager turned educationist Ashish Dhawan concludes that Band Aid-like fixes through skilling will not work and India will have to fix its school and college education system (don't miss the telling graphic on how South Korea avoided the middle-income trap).

>> Vinod Rai, the controversial ex-government auditor, takes a step back and posits that India is not a nation of missing institutions; just that its institutions are only beginning to stand up.

>> Rajan Anandan, Google's man in India, predicts a reset - of the positive kind - in India's economy as Internet access spreads deep upcountry and 100 million Indians start shopping online in a couple of years time.

These essays and 17 others - on demography, globalisation, quality, entrepreneurship, governance, natural resources, ease of doing business, and equality - make for compelling reading. In my letter in last year's anniversary issue, referring to the Chinese year of the horse, I urged India to gallop, not trot. Guess what? 2015 is the year of the ram. That augurs well for India - just the power punch we need to raise our game.

Here's wishing you a prosperous New Year in advance.

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