United colours of India
India is currently the flavour of the season globally. Its growth story is pulsating with infectious optimism, writes Mukesh Ambani.india Updated: Feb 06, 2006 01:39 IST
India is currently the flavour of the season globally. Its growth story is pulsating with infectious optimism. As Finance Minister P. Chidambaram gives final touches to Union Budget 2006, he faces a huge challenge: how not to dampen this enthusiasm about India's manifest destiny? This challenge becomes more daunting because the economic reform process needs to cross another socio-political hump, more arduous than what he faced in his first stint as a dynamic commerce minister who dismantled the permit-licence superstructure in a single courageous sweep.
Fortunately, the reformer finance minister of the Nineties is heading the government as prime minister. However, the composition of Parliament is qualitatively different from that of the early Nineties. Building a consensus in support of desirable policies will demand dexterity and skill of the highest order. Conceptually, the challenge this year lies in blending the urgent imperatives of accelerated growth with the pressing need for greater equity. Policies leading to higher productivity and improved competitiveness must be made compatible with the aspirations of the vast masses across the nation. An important opportunity to build on rising confidence in climbing to a higher trajectory of economic growth needs to be brought in harmony with heightened consciousness about the weightage of social development in India's growth story.
Over time, the Union budget has assumed a character that goes much beyond an exercise in financial balancing and taxation adjustments. It has come to signify a statement of socio-economic aspirations. Till recently, developed countries grew by relying on innovation and sophisticated services, while developing countries depended on raw materials and low-end manufacture. India is changing this paradigm and making a statement that people can be a potent force for development. The budget should reflect this strategic change in developmental philosophy.
Therefore, generating employment must be at the centre of the rainbow of economic policies and fiscal initiatives in Budget 2006. India is a country of young people and is generating employment of only one million a year, as against the asking rate of ten million. This situation is unacceptable. By outlining strategies for mounting a comprehensive assault on the problem of unemployment, the budget should win over the support of India's youth behind the endeavours of rapid growth.
The National Rural Employment Guarantee initiative underlines the high priority the government is giving to this task. But, over time, employment generation must become an integral component of the growth story and encompass India's educated youth and professional workforce.
This demands that an elevated rate of economic growth is brought about with accelerated development of almost every sector of the Indian economy. It is critical to ensure that India has several of its engines of development firing on all cylinders to sustain growth, progress and prosperity over the long term. Dispersed development is vital to make sure that progress permeates to the countryside and is not the privilege of a small proportion of well-to-do Indians residing in urban agglomerates. Innovation is important in the context of a knowledge-driven era. International competitiveness is essential for survival in a globalised world. And going global is necessary to access and create opportunities beyond India.
Fortunately, there is enormous confidence among young Indians, corporates and policy planners that India can take on the world. Indian products are finding export markets, Indian service offerings are attracting overseas users and Indian companies are making global inroads.
As a nation, we have to aim and achieve double-digit economic growth on a sustained basis. This is essential to pull India from the trappings of poverty and deprivation.
Simultaneously, we have to aim to attain global leadership in every sphere of economic activity.
Many sectors would qualify on these criteria - agriculture, irrigation, food processing, energy, transportation infrastructure, construction, automobiles, information technology, telecommunications, biotechnology, tourism, organised retailing, education and healthcare. All these sectors can undoubtedly build upon India's market potential, competencies and competitive advantage.
Global leadership can come about by an environment that encourages thinking on a global basis. Such a thought process would lead to an economic agenda that opens doors to global trade and a policy regime that enables access to resources to ally with or acquire enterprises.
I would envisage a Union Budget that helps build new productive opportunities by stimulating entrepreneurial capacity, building human capacity and encouraging employment intensive investments.
Stimulating entrepreneurial capacity would help create opportunities for raising income levels of vast sections of Indian society. Concurrently, building human capacity would enhance skill sets for higher income jobs created by entrepreneurs. This would lead to greater purchasing power.
Given our resources situation, there is a pressing need for private-public partnership in human capacity building. This can come from investing significantly in education for the long term, establishing private universities, setting up of centres of excellence on the lines of IIM, IIT and IISc and increasing the capacity of all institutions of higher learning.
India, along with China, is emerging as an engine for global economic growth, altering the global financial structure and graduating as global nodes for technology and innovation. This leads to a continuous comparison between the performances of the two economies. This places Indian policy-makers under tremendous pressure even when they do not have the same flexibility and manoeuvrability as their Chinese counterparts.
Luckily, India has the fifth highest foreign exchange reserves in the world and Asia has now 65 per cent of global reserves. Global capital is already flowing in search of higher returns, and global trade is already shifting to countries that are competitive globally in terms of services and manufacturing. These are realities that cannot be wished away. The sheer momentum of these developments is going to generate challenges never seen or experienced before. The finance minister will need political space and broad-based support to put in place a whole range of measures that will keep the Indian momentum going.
India is fortunate to have a cadre of people who are willing to learn and innovate. They are changing the ways of business, not just at lower cost, but by doing things that simply could not be done before.
However, there are institutional and infrastructure gaps that need to be filled. Free markets are not enough. Successful innovation requires supporting institutions. Commercial innovation today is generally a product both of basic scientific insight and applied engineering. The first relies on universities and public laboratories, the second on private, profit-driven firms.
Successful innovation requires academia, government and industry to work in harness. The technological capacity of an economy depends not just on its own innovations, but on its capacity to adopt the technologies produced elsewhere. This can happen through three main channels. Countries can import technology embodied in capital and consumer goods. They can license technologies from patent holders. And they can attract foreign direct investment, so that a multinational enterprise with proprietary technology sets up production inside their borders. In all cases, countries must be successful as exporters to pay for the imports of technology or to pay dividends on foreign investment.
I am sure Budget 2006 will address these complex and competing demands in a creative manner and go beyond mere allocation of revenues to facilitate the flow of resources, from taxing the taxed to motivating achievers, from only stimulating investments to growing consumption and from merely plugging loopholes to unleashing productive energies.
Union Budget 2006 should be an instrument for socio-economic development, as well as an inspiration for global achievement.
Personally, I look forward to Union Budget 2006 to being highly inspirational.
The writer is Chairman and Managing Director, Reliance Industries Limited
First Published: Feb 06, 2006 01:39 IST