If there is one incurable, almost fatal disease of 2010 that India is going to carry through the next decade, it is the fear of free and open communication. Before the noxious force of the Niira Radia tapes, the rich and powerful seem to have lost all their wealth and might. Unlike in the past, new technologies prevent these conversations from dying — they are and will remain in the public domain for all to hear, analyse, judge. And, since time is money, this has caused the cost of doing business to multiply in 2010. With sensitive business information no longer safe on mobile phones, businesses will now have to focus on finding a way to compress time, a concept that currently lies somewhere between physics and spirituality. Else, business and its related politics will have to revert to emissaries of the past to deliver price-sensitive, regime-influencing messages.
An increasing number of business leaders now return my calls from a landline number, mistakenly believing that these can’t be tapped. But beyond the fun, games and hype around India’s top businessmen, lobbyists and politicians putting their feet in their mouths lies a black hole that could end up sucking a few percentage points off India’s economic growth. While the debate between privacy and national interest will continue well into the coming decade, the slower pace of actual business transactions will force large companies to look outside India for value creation. As a result, while the turnover may remain the same in Indian balance sheets, the jobs delivering some of those revenues may emigrate — to the Philippines for technological outsourcing, the continent of Africa for agriculture and food processing, Australia and Brazil for mining.
The other big issue that India’s political economy will pursue throughout the decade, and scarily even beyond, will be boosting growth in the manufacturing sector, a sector that needs three things to operate efficiently and create jobs — land, skilled labour, and policies that treat the entrepreneur as at least as much of a patriot as the politician.
The problem of employable labour is not so difficult to manage and industry chambers backed by large industrial groups have already begun to do their bit to “reskill” India. The big hurdle here is India’s inertia-laden industrial training institutes, which are not willing to introspect and change with the times.
That, however, is the least of India Inc’s problems and the coming decade will see success stories trickle out, laying the ground for a demonstration effect to work its way through the vitals of the economy.
The perception of the entrepreneur as a cold-blooded moneyobsessed scumbag too can change, though possibly not as rapidly — India has invested way too much time and energy trying to embrace poverty, or at least ensure that islands of prosperity remain populated exclusively by the 500 or so truly wealthy and powerful. True, some of that has changed, with driblets of opportunity and power being allowed out to an emerging mass affluent since the late 1990s.
On the other hand, the large number of black sheep among India’s entrepreneurs hasn’t helped, as they grabbed contracts for mines, roads and railway lines through bribery, policy manipulation and brute force. The coming decade will bring a small change. Backed by global finance, India will see the rise of the professional entrepreneur, a rise that is likely to be more meteoric than that of the speculator during the short dot-com boom of 1998-2000. If economic governance moves in tandem — by, say, posting online all the permissions, forms, rules and official sanctions needed to start a business — the State will have finally matured in its role and made that vital transition from developmental hurdle to facilitator of jobs, wealth and prosperity. Some of this will happen during the coming decade, as states vie with one another to attract entrepreneurs. My guess: Gujarat and Himachal Pradesh will lead the way.
LAND: THE FINAL FRONTIER
Of the three, land acquisition is and will remain the biggest hurdle facing India’s industrial growth. Such land as is available is held largely by the voiceless poor, whose demands and protests have been lost in the opacity and complexity
of India’s laws. And though around it, there are 19 Acts of Parliament, land acquisition remains India’s biggest political economy challenge. The Acts, meanwhile, have enabled the acquisition of more than 1.5 lakh sq km of land — the combined size of about 143 countries, including Bangladesh, Nepal and Greece — between 1951 and 1990, according to Asian Development Bank. More than half of this is estimated to be private property.
Specifically, 5% of Orissa’s and Andhra Pradesh’s land mass, 3.5% of Goa’s and 3% of Kerala’s has been acquired, displacing 50 million people according to The World Commission on Dams. That’s just a little less than the population of France.
Two questions need to be answered here — have the benefits been greater than the cost; and have the displaced been given adequate economic and societal compensation? After the high-profile Vedanta-Niyamgiri and Tata-Singur fracas, these uncomfortable questions will need to be addressed if credibility is to be restored to the dealings of politics and big business. Meanwhile, the tug-of-war over the proposed amendments to the Land Acquisition Act has begun, and I am hopeful that, some time during the next decade, it will be resolved as a fine balance between voters’ and investors’ interests. The demographic migration from rural areas to metropolitan centres and from agriculture to the industry and services sectors will likely hasten that resolution.
IN THROUGH THE OUT DOOR
The last mega-trend that will impact the Indian economy will come from outside India. Last year saw leaders of the world’s five most powerful economies — President Dmitry Medvedev of Russia, Premier Wen Jiabao of China and President Nicolas Sarkozy of France in December, US President Barack Obama in November and UK Prime Minister David Cameron in July — come to India and return home with industrial orders and jobs. With this, India’s importance on the global stage has been officially ratified. Led by its young population, economic reforms, untapped hunger for infrastructure and trilliondollar GDP growing at 9% per annum, India in this decade will be the world’s premier investment destination.
The way India managed its financial sector during the world’s worst economic crisis since the Great Depression has shown a policy maturity that began when the country rejected the US model of opening everything up all at once. India’s policy gradualism is now being touted as one arm of the Asian Way; the other being the Chinese model of state-regulated open markets. This has happened even as protectionist barriers have begun to be re-erected in the developed economies to protect their citizens’ jobs. So, while being an active driver of the G20 agenda, India is simultaneously driving bilateral deals with the world’s most powerful economies, balancing strategic interests with economic ones. The question, when the world wants India to succeed so it can benefit from our large orders and growing markets, is: When will India’s GDP growth jump to the double digits? My answer: In this decade — before 2015.
But growth is only one aspect of being a developed nation. We would do well to remember that most of India’s $1.2 trillion GDP consumption is limited to about 300 million people. More than 800 million Indians — that’s 2.5 times the population of the US, four times that of Brazil, and 12 times that of the UK — still live on less than $2 (Rs 94) a day. And while a start has been made, this shame will not go away in a hurry, however high our economic growth rate. We will have to wait for subsequent decades — my assessment is somewhere closer to 2050 — for this grotesque economic disparity to end. Say a prayer for rational thought | Transforming growth
(Gautam Chikermane is Executive Editor (Business), Hindustan Times)
*The views expressed by the author are personal