Sector: Economy
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INDIA 2050: Envisioning the Future
Envisioning the future: India 2050
Chairman of Pahle India
Foundation and Honorary
Senior Fellow – NCAER
Putting India First to Make
India First – that’s the
tagline of the NGO he
Chairs. As an Economist, he
has built econometric
models on the UK and
Canadian economies, has
worked for the World Bank
in various senior positions
on several countries in Asia
and Africa, has been a
consultant for Asian
Development Bank, the
UNDP and the UN, and has
served as a senior faculty
member at Research and
Information System for
Developing Countries, a
think tank under the
Ministry of External Affairs,
Government of India. He
has to his credit several
published works, two
recent ones being India
2050: A Roadmap for
Sustainable Prosperity, and
The Resurgent India: Ideas
and Priorities.
Dr Ramgopal Agarwala
Since 1991, India has been one of the fastest growing economies in the world.
However, business-as-usual is not good enough for India to proper. The 1991
reforms model must be critically re-examined.
India needs to move away from the socialistic/Anglo-Saxon model to the
German/Nordic economic model.
Sabka saath, sabka vikas
(everybody’s
support, everybody’s progress) is on similar lines.
Spending on education needs to increase from ~3% of GDP to ~6%, and policy
makers must try to retain educated people in the country.
Gross investments must be ~40% of GDP, in which the government needs to
play an important role by increasing its savings and investments towards ~10%
of GDP.
The financial sector needs to play a bigger role, but in a different manner. It
needs to accept a small financial transaction tax to mitigate speculative activity.
It needs to focus on increasing trust among savers to increase financial savings.
The current government’s efforts to encourage vegetarian food (reduce carbon
emission), and yoga and meditation (bringing spirituality) are noteworthy.
A 10-point program for making India number-1 again
While we are celebrating the 25
th
anniversary of India’s economic reforms, we must
examine the economic philosophy underlying the 1991 reforms. Though India has
been one of the fastest growing economies in the world, business-as-usual is not
good enough for India to prosper. Going by current trends, India is likely to remain
divided and inequitable. It would continue to be in the middle-income trap. The 10-
point program (outlined below) could help India increase its per capita income to
the levels enjoyed by the developed world. If so, with a population size of more than
a billion people, India will become the world’s largest economy.
1.
Quantify economic dimension of ‘tryst with destiny’:
Our long-term goal must
be to catch up with per capita income of the developed countries.
2.
Plan for a marathon, not a sprint:
Assuming about 7% growth over the next
four decades, the earliest that India can become number-1 is by 2050. The
citizens must give the political leaders a long-term mandate for reforms.
3.
Redefine ‘good life’:
We need to leapfrog to a sustainable high-income lifestyle,
which is also healthy and spiritually fulfilling.
4.
Focus on human capital formation:
Our obsession with manufacturing is
overdone and our potential in HRD is vastly underutilized.
5.
Inclusiveness through jobs and social security for all:
Job-creating growth will
come largely from the services sector including construction.
6.
From Anglo/American model to German/Nordic model:
In the proposed
model, the private sector will be a key player in producing goods and services
that have low externalities. The government will play a leading role where
substantial externalities prevail. This may imply that over time, the public sector
may have to manage 40-50% of GDP as is the case in Germany and Nordic
countries.
Nikhil Gupta
(Nikhil.Gupta@MotilalOswal.com); +91 22 39825405
September 2016
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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Economy
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7.
Mainstreaming spirituality in development:
We need the second freedom
struggle, to give freedom from wants to all and to retain our freedom in geo-
political terms.
8.
Development from the roots:
Develop “Neo-Swadeshi” mindset – be rooted in
own history and culture, yet learn from the best anywhere, not just the old
colonial masters.
9.
Reform at the margin – new cities and towns on new principles:
Develop
knowledge-centric cities on new principles of ecologically sound infrastructure
and new social & economic policies.
10.
A big but redefined role of financial sector:
Develop transparent and
trustworthy capital markets to attract savers.
India at crossroads
Overall, Dr Agarwala believes that the preparation to make India number-1 again in
35 years must begin today. India is at the crossroads – it will have to choose
whether to stay a deeply divided society with modest incomes or adopt the Neo-
Swadeshi model.
Exhibit 1: Share of India and China in the world economy
Year
India
China
1
32.9
26.1
1000
28.9
22.7
1820
16.0
32.0
1950
4.2
4.6
2001
5.4
12.3
2015*
7.0
17.1
* Figures for 2015 based on World Bank’s data
Exhibit 2: Sectoral GDP growth rates (Annual, %) in 2011-50
Year
Education and research
Medical and health
Business services
Construction
Agriculture, forestry etc
Mining and quarrying
Manufacturing
Public administration etc
GDP
2011-20
11.2
10.2
11.0
9.3
3.4
3.7
7.0
7.3
7.3
2021-30
9.5
12
11.4
10.4
3.0
4.9
7.8
7.7
8.3
2031-40
6.7
11.7
8.0
6.1
2.0
4.0
5.4
5.6
6.2
2041-50
4.3
10.2
5.3
2.3
1.1
3.1
3.4
4.0
4.3
2011-50
7.9
11.0
8.9
7.0
2.4
3.9
5.9
6.2
6.5
Source: For details, see Agarwala, R. India 2050: A Roadmap to Sustainable Prosperity
September 2016
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