Moral rectitude, private enterprise and State support will drive progress. KK Birla presents an interesting study of India as it may emerge by March 2020.Updated: May 09, 2007 03:48 IST
The Indian economy is on the path of rapid progress. In July 1991 the country’s economy was so shattered that India was on the brink of bankruptcy. The Congress won in the general elections of June 1991 and Narasimha Rao became Prime Minister. He took a wise step and made Manmohan Singh the Finance Minister who, in turn, opened up the economy to the private sector. The quantum of progress that India has made from 1991 to 2007 has not been achieved by any other country. It is a tribute to both the government and the business community.
It will be an interesting study to present to my readers a picture of India as it may emerge by March 2020. An attempt has been made to assess the situation in a methodical manner, and not indulge in kite-flying and guess-work. But in order to study and ascertain what shape the economy will take by 2020, certain assumptions have had to be made. I have made two main assumptions. The first on labour laws. In India, labour laws were framed soon after Independence and became outdated a long time ago. India is perhaps the only country where so many restrictions exist on retrenchment of surplus labour force. It is sad that the government is not permitting the industry to reduce surplus labour. Labour laws have not been liberalised only for political considerations. My first assumption is that labour laws in India will be liberalised. I may mention that in China there are no such rigorous labour laws as prevalent in India. The second assumption I have made is that oil prices will float at around $ 70 per barrel.
The way India has progressed post-liberalisation, the GDP growth should be around 8.5 per cent on the average. The growth in the industrial sector should be about 9.9 per cent, about 9.4 per cent in the services sector and 3.9 per cent in the agricultural sector. In the last four years, the actual GDP growth in India has averaged 8 per cent. With skillful monitoring, India can achieve a GDP growth rate of 8.5 per cent.
Digressing a little, I would advise the following measure regarding privatisation of public sector companies. The government should sell off only sick companies. Companies in the public sector which are running well should never be privatised; they should, instead, be expanded to become world-class organisations.
To begin with, there is need for regeneration of the Green Revolution. The agricultural growth for the 10th Five-Year-Plan (2002-07) was only 2.3 per cent per year. India’s green revolution took place in the late 1960s. After the first flush of progress, the agricultural sector has become stagnant. The father of the 1960s’ green revolution was MS Swaminathan, a brilliant agricultural scientist, recently nominated by the President to the Rajya Sabha. Under his supervision, the government should set up a committee to invigorate the agricultural sector.
My estimate is that the per capita income of India, Rs 31,091 in 2005-06, will increase in 2020-21 to Rs. 82,000 at current prices. India will indeed flourish. Status symbols have their own importance both in villages and cities. In the 1930s, the status symbol in the villages, where about 73 per cent of India’s population lives, was a house made of bricks. In the 1980s, the status symbol became a scooter, by 2000 it was a motorcycle. In 2020, a car will become the status symbol. My prediction is that by 2020, in all the major towns and in all big villages, every family will have a car. The day owning a car becomes the status symbol will be a great day indeed for India.
Now, the poverty line is described as earning by a person of only Rs. 10 per day. The present level of population below the poverty line is 28 per cent. By 2020 this will go down to about 10 per cent. The population, 107 crore today, is likely to increase to 133 crores by 2020-21. The percentage of minorities, at present 12, is likely to go up to 13 or 14 in 2020.
There will be a revolutionary change in the housing sector. The Indian government rightly encourages housing loans. Construction generates demand for all types of goods, like cement, steel, bricks, furniture, airconditioning machines, refrigerators etc. These industries will, in turn, make purchases which will lead to a vast industrial expansion.
Many real estate companies are developing small townships. The quality of construction has greatly improved. Middle class families, I am glad to find, have become highly quality conscious. I once took a round of various construction activities in progress in Noida and Gurgaon with someone associated with housing projects. I was told that people are prepared to pay higher prices for better quality flats. Before 1991 when the economy was growing at the rate of only 3 per cent, people preferred to buy goods at economic prices. They were not as quality conscious as today’s middle class is.
The production of cars, about 1.2 million per year now, will become 6 million per year by 2020. Eighty per cent of people in towns and cities will have airconditioners.
All round efforts are being made to replace oil with other sources of energy. Nuclear power should play a big role in this. In France, 79 per cent of the power produced is nuclear, in UK it is 20 per cent, in Japan 29 per cent and in the US 19 per cent. India’s oil and gas production will both increase. There is a vast scope of finding natural gas as also oil. Efforts are on in this direction.
Retail business at present is worth $ 300 billion. By 2020 this will increase to $ 800 billion. Only 3 per cent of the organised sector is at present in the retail business. By 2020 this figure will rise to 50 per cent. Apart from Wal-Mart, the Mukesh Ambani Group, Bharati, the Tatas and the Aditya Birla Group will also make forays into the retail stores business.
Indian executives are of a very high calibre. They are hardworking, sincere, sober and people of vision. They have made a name for themselves in foreign countries wherever they work.
Infrastructure is the weakest link in our economy. Had successive governments left industrialisation mainly to the private sector and concentrated their energy and resources on infrastructure, a world of difference would have been made in the economy. The funds that need to be spent on infrastructure in my estimate will be Rs 7.5 lakh crore by 2020. A main area of concern in infrastructure will be the huge shortage of water India will certainly face. The immediate solution is desalinisation of water as is being done in Israel and the UAE. In both these countries, rainfall is negligible, there are no big rivers and access to even drinking water is a problem. But both the countries have resolved this problem by resorting to desalinisation in a big way.
The Indian government is putting up a desalinisation plant in Chennai, albeit a tiny one unlikely to meet the city’s needs. But a beginning has been made. From this small plant let us understand what the problems are of setting up such plants and then go in for desalinisation in a big way.
That apart, India’s water crises will be tided over if the long-standing proposal for linking the rivers of the north and south is pushed through.
Likewise, our roads and ports are in a poor condition and airports are heavily congested. We should learn a lesson from China. The way in which it has joined Beijing and Lhasa by a rail line in five years is amazing. India could learn from China’s discipline in life and perseverance. A project that the Chinese are contemplating which should alert India is the diversion of the Brahmaputra, which will take a minimum of 25 years. The Brahmaputra has immense potential of producing hydro power — about one-third of India’s total power potential.
Unemployment is about 10 per cent in India. Even in 2020 there will not be much improvement in the unemployment situation. This is because world-class mechanisation leads to employment being reduced. However, after 2020 when the economy is further strengthened, unemployment will be reduced sharply. This is my reading.
As per Indian ratings, a person earning more than Rs 1 lakh per year belongs to the middle class, 30 per cent of current population. My estimate is that by 2020 this figure will increase to 40 per cent. Thus the middle-class will become the largest single economic community. It is middle-class families which provide leadership in the country. With the increase in the volume of the middle-class, India will prosper even more.
My advise to my countrymen is to keep our moral fabric intact, fight corruption and present a true image of united India. For this we have to tread on the path of piousness and moral rectitude. We have to follow the famous teaching of the Kathopanishda, ‘Uttishtat, jagrat, prapya varan nibhodat’. “Awake, arise and rest not till the goal is reached”.
KK Birla is former MP, Rajya Sabha