THE REFORM JUGGERNAUT

INDIA – 2020

LAST 20 & NEXT 20 YEARS

So what explains India’s growth over the last decade?

Since no economic reforms occurred, and the international environment was a net negative, we have to go back to pre – 2002 for an explanation :-

1.          LESSONS LEARNT, AND TAUGHT

Looking back at those developments it seems that management of capital flows is favoured more than capital controls as the debate rages in the world now.

2.         END OF MAI BAAP SARKAR

Once we decide to privatize, one part of the govt’s powers go; allow units to shut down, and another power goes; free up petroleum prices. This is why it is so important to hurry up with the second stage of economic reforms.

3.         THE CHALLENGES OF URBANISATION

Without improving the conditions of living in our cities, we cannot expect them to act as engines of growth delivering 8-9 percent GDP growth and to expand opportunities of employment. Conscious decisions have to be taken to promote densification. Innovative and transparent ways have to be found to plan our cities vertically as well, by varying the floor- space index within a framework. States that benefited from JNNURM were those in which urban local bodies were financially strong, where state governments provided an enabling environment by carrying out reforms.

4.          RISE OF CIVIL SOCIETY

While non-government organisations were organisations outside government, ‘civil society’ was a pleasantly coined antithesis to government. Liberalisation did bring affluence to some people. Growth rates began to rise. However, the poor found themselves fighting as much for survival as before. The cycle of droughts in Rajasthan continued. With the failure of the India shining campaign to give the BJP a second term, came an acknowledgement of the assertion of popular will against continuing poverty and the reform- driven model of development.

5.          THE TAXING REFORMS

In the last few decades, we have come a huge distance, yet we lag behind several emerging economies. So how far have we come since 1991? However, the pace has been slow, yet once the changes are made in India, they tend to stick a bit longer, unlike in Latin America where reforms can often get undone as governments change.

6.          END OF SINGLE-PARTY RULE

The highest rates of economic growth and economic liberalizations policies in India have happened under coalition governments. The question is: Have we seen the end of single-party rule in the last 20 years? Is this trend likely to continue in the near future?                                                                                       The answer is : Yes, coalitions are here to stay for the foreseeable future.

    

7. CONSUMING CLASSES

We have not fully grasped how gigantic the consumption machine that is being created is. We are not prepared from the supply side for its steady acceleration as incomes increase and consumption is visible. One billion people with an aspiration to consume more are those, with no social security, mostly self-employed, struggling with poor infrastructure, child-obsessed, with few avenues of entertainment.

8. THE MANDAL AFTERMATH

The odd consequence of reservation has been that we now can talk only of power sharing, not of discrimination. Over the last decade or so, as the economy gathered steam, as state finances allowed states to do much more, the fulcrum of politics seemed to shift away from the identity politics mandal had unleashed.

9. THE MEGA MIDDLE CLASS

Perhaps the biggest revolution independent India has seen is the rise of the Great Indian Middle Class comprising of 31.4 million households or 160 million persons.

 10. THE MACHINE THAT RUSTS

 After 20 years of fiscal reforms, the need of the hour is to introduce a set of manufacturing-specific reforms. We need to have much greater transparency and simplicity in the way our factories function. In Thailand or China, the number of inspections that are carried out is a fraction of what it is in India.

11. THE INDIAN MOBILE REVOLUTION

A fundamental shift is already underway with ‘bytes’ replacing ‘minutes’ and ‘data’ emerging as the new star in the telecom space. The “Telecom Effect” has had a multiplier impact on the economy. According to GSM Association and Deloitte, the long term GDP growth rate increases by 1.2pc with every10pc increase in mobile phone penetration.

12.   IT REBOOTING .

There are hundreds of thousands of workers in India’s IT industry who now have more than 10 years of experience, and lets not forget we have the largest population of young people in the world. Thus, we should now focus on being paid for our brains (IPs), not just for our sweat (services).

13  MBA AS PROTAGONIST.

In the 70s, every producer, technician and star would prefer his relative to join his business to an MBA professional. Now on screen a man with money was no longer a villain, but a successful man. The hero could eye an engaged heroine who would run away with the hero in her bridal outfit at the last minute.

14. MEDIA EXPLOSION .

For those who remember the days of black & white TVs with one channel and the grand single-screen cinemas, the choices available in all media today are astonishing. A liberalized foreign investment regime and other regulatory initiatives are leading to a conducive business environment for Indian M&E. FDI is permitted in almost all segments.

15.   RIDING GLOBALISATION .

The big questions now are not around whether to go global, but how to maximize value from globalization. Indian businesses that are expanding globally must be as prepared as they are ambitious, with robust domestic business platforms to aid financial stability during expansion, and a unique business model.

 16.  THE NEW RETAIL TALE .

E-commerce will have the potential to cause much massive disruption for traditional as well as modern retail. A bigger revolution in Indian retail is likely to emerge in the next 10 years on account of e-commerce that may well render the entire debate on modern retail and FDI somewhat irrelevant.

17.  THE NEW AGE LEADER.

The volatility in industry leadership had increased sharply after 1990. The probability that an industry leader will remain a leader after 5 years had nearly halved in this period. One common theme runs through them, and differentiates them from those they replaced in the leadership stakes. IT is the quality of their leader – the huge aspirations, and risk taking abilities to back their dreams.

18.        THE ART OF GIVING .

Our accelerating pace of economic development over the past two decades is seeing the lag-effect rise in giving as well. The experience over the past decade also shows that Indians are still quite ‘tactical’ in their giving. It is known to all that the biggest bang for the buck will come from improved governance and delivery in our public institutions.

 19. INDIA EVERYWHERE.

The ‘product’ that was India kept evolving, improving and earning worldwide respect and recognition as a country of choice and preference. It was 15 years after 1991, and the start of the reforms, that CII launched a major, high profile, high-visibility presentation in davos called ‘India Everywhere’, an industry-led initiative, supported by government.

                                                                                                               Edited by:

                                                                                                              Ms Shilpa