WHAT INDIA NEEDS TO MAINTAIN ITS GROWTH??
Presently India is witnessing all-around sectoral growth which is collectively contributing to its globally recognized ‘Growth Story’.
Indian economy is the third (3rd) largest domestic economy and is expected to reach second (2) position by 2035 according to World Economic Forum (WEF) reports. IMF reiterates the same fact suggesting: “India will become the second largest world economy by 2045 if it continues to grow at the same pace of 8.5%-9% for the next three (03) decades”. The above facts & predictions are strictly influenced by the growth depicted by India Inc since the year 2001 when India adopted the Export- Import policy (EXIM) of foreign trade later converted into Foreign Trade Policy (2004-2009) established to achieve two (2) major objectives.
Indian economy is the third (3rd) largest domestic economy and is expected to reach second (2) position by 2035 according to World Economic Forum (WEF) reports. IMF reiterates the same fact suggesting: “India will become the second largest world economy by 2045 if it continues to grow at the same pace of 8.5%-9% for the next three (03) decades”. The above facts & predictions are strictly influenced by the growth depicted by India Inc since the year 2001 when India adopted the Export- Import policy (EXIM) of foreign trade later converted into Foreign Trade Policy (2004-2009) established to achieve two (2) major objectives.
· To double our percentage share of global merchandise trade within the next five years
· To act as an effective instrument of economic growth by giving a thrust to employment generation
India, with the right policies and fundamentals at place is today managing to post high growth within complete sectoral spectrum (Agriculture/Manufacturing/Tertiary). However India’s tertiary sector has played a bigger role in this entire Bull Run. Today, Tertiary sector contributes 51% of India’s Gross Domestic Product (GDP). Industries like IT, ITes, Telecom, Banking, Insurance, and Securities & Finance have played an instrumental role in defining India’s global brand & identity. These factors have brought in newer concepts (Technology/Lifestyle/Products) and greater opportunities for Indians to live with. With the west, fishing on India’s cost & labor advantage, Indian companies are moving out to capture their matured domestic markets, looking in to give these economies an ‘Economic extension shift’.
However, these opportunities have brought in ‘expected’ challenges for Indian policy makers and policy takers. After displaying steady growth for the past few years, Indian Inc is showing signs of declining growth on the trend line basis. According to the latest reports, YoY quarterly growth rate (Source-Business Standard, Nov.2, 2007-Frontpage) is declining and India’s sales & profit margins are exhibiting negative growth by 600 basis points year on year. The reasons contributing to this declining growth do not reside completely international as Indian government would like to see it by highlighting ‘Stronger Rupee, International Credit Crunch (Due to America’s Subprime Mortgage Lending Blues), Japanese Economic Slowdown, Higher Crude Oil Prices, Reduced Consumer Spending and probably even Declining Int. Consumer Confidence Index in that respect. Although, we agree, these factors do play a role but we also believe there are various shortcomings inside the bracket (within India) that needs to be addressed.
One of the biggest shortcomings we see is that of INDIAs’ over-reliance on the services sector. Since service sector is ‘talent driven’, India has managed to bolster its growth and had taken complete advantage of its ‘Mass Young English’ speaking workforce. However, we think, India & Indian policy makers and implementers have taken somewhat an easier root to fame.
In order to continue growing steadily, India needs physical infrastructure. According to Government estimates, India requires USD 365 billion of investments to develop and re-enforce it’s practically decades’ old infrastructure. Besides roads, transport, power, energy, India needs to take legitimate ‘actions’ to invest in domestic industrialization. India needs to build factories, and manufacturing facilities to reduce its over-reliance on the services sector and the export markets. India needs to develop its domestic product market and invest in manufacturing today, as other players like China, Brazil, Mexico, Taiwan, and Philippines are moving ahead with their services sectors. This ‘skills driven edge’ or one can say “Comparative Advantage” which India enjoys today of having English speaking, Educated & Low cost labor at its disposal within the services sector would not last for long and consequently India may lose the status quo.
Today, India needs to move fast in developing the SEZs, EOUs, SPVs and achieve its target of building 600+ units by 2010. India needs regulated long term foreign investments, and not the ones like PE investments. India need FDIs headed towards physical infrastructure development and some where in this course, India needs to give up its ‘solidarity’ policies and work in for an ‘economic makeshift, a manufacturing makeshift’.
Lastly, one can very categorically say that “Realizing India’s dream is not a one time story, it’s a phased story”. Infact, Lehman Brothers believe the same thing and expect India to grow consistent if it manages to change its focus and take effective policy measures today.
Note: Points stated for India’s growth are not exhaustive, there could be much more to add to India’s growth potential.
· To act as an effective instrument of economic growth by giving a thrust to employment generation
India, with the right policies and fundamentals at place is today managing to post high growth within complete sectoral spectrum (Agriculture/Manufacturing/Tertiary). However India’s tertiary sector has played a bigger role in this entire Bull Run. Today, Tertiary sector contributes 51% of India’s Gross Domestic Product (GDP). Industries like IT, ITes, Telecom, Banking, Insurance, and Securities & Finance have played an instrumental role in defining India’s global brand & identity. These factors have brought in newer concepts (Technology/Lifestyle/Products) and greater opportunities for Indians to live with. With the west, fishing on India’s cost & labor advantage, Indian companies are moving out to capture their matured domestic markets, looking in to give these economies an ‘Economic extension shift’.
However, these opportunities have brought in ‘expected’ challenges for Indian policy makers and policy takers. After displaying steady growth for the past few years, Indian Inc is showing signs of declining growth on the trend line basis. According to the latest reports, YoY quarterly growth rate (Source-Business Standard, Nov.2, 2007-Frontpage) is declining and India’s sales & profit margins are exhibiting negative growth by 600 basis points year on year. The reasons contributing to this declining growth do not reside completely international as Indian government would like to see it by highlighting ‘Stronger Rupee, International Credit Crunch (Due to America’s Subprime Mortgage Lending Blues), Japanese Economic Slowdown, Higher Crude Oil Prices, Reduced Consumer Spending and probably even Declining Int. Consumer Confidence Index in that respect. Although, we agree, these factors do play a role but we also believe there are various shortcomings inside the bracket (within India) that needs to be addressed.
One of the biggest shortcomings we see is that of INDIAs’ over-reliance on the services sector. Since service sector is ‘talent driven’, India has managed to bolster its growth and had taken complete advantage of its ‘Mass Young English’ speaking workforce. However, we think, India & Indian policy makers and implementers have taken somewhat an easier root to fame.
In order to continue growing steadily, India needs physical infrastructure. According to Government estimates, India requires USD 365 billion of investments to develop and re-enforce it’s practically decades’ old infrastructure. Besides roads, transport, power, energy, India needs to take legitimate ‘actions’ to invest in domestic industrialization. India needs to build factories, and manufacturing facilities to reduce its over-reliance on the services sector and the export markets. India needs to develop its domestic product market and invest in manufacturing today, as other players like China, Brazil, Mexico, Taiwan, and Philippines are moving ahead with their services sectors. This ‘skills driven edge’ or one can say “Comparative Advantage” which India enjoys today of having English speaking, Educated & Low cost labor at its disposal within the services sector would not last for long and consequently India may lose the status quo.
Today, India needs to move fast in developing the SEZs, EOUs, SPVs and achieve its target of building 600+ units by 2010. India needs regulated long term foreign investments, and not the ones like PE investments. India need FDIs headed towards physical infrastructure development and some where in this course, India needs to give up its ‘solidarity’ policies and work in for an ‘economic makeshift, a manufacturing makeshift’.
Lastly, one can very categorically say that “Realizing India’s dream is not a one time story, it’s a phased story”. Infact, Lehman Brothers believe the same thing and expect India to grow consistent if it manages to change its focus and take effective policy measures today.
Note: Points stated for India’s growth are not exhaustive, there could be much more to add to India’s growth potential.
No comments:
Post a Comment