What work we can done for growing Indian Econony
Answers
I am not an economist but will try to answer with little I have read about indian economy.
Lets divide the growth on three pillars or the three sectors i.e; Agriculture & allied activities, manufacturing and services.
1. Agriculture & allied activities : We have a large number of people, about 51%, employed in this sector but it shares only 14% of GDP with about 3.5 % growth per year. The sector is ailing with low agricultural productivity, small and fragmented land holdings, lack of financial credit to farmers, etc. The productivity shall be increased with more input on infrastructure for irrigation, seeds, fertilisers. About 60% of farmers still are dependent on monsoons which finally becomes a gamble for budget each year. There is a lot of scope in the semi-arid, arid regions of India which are perfect for nutritious crops like maize, bajra, ragi, oats etc. The food processing industries can be set up in these regions for biscuits & malts which has started picking up market in cities with health conscious people. The cropping intensity is still very low compared to developed countries. More than 90% farmers belong to small & marginal category having less than two acres of land and even the bigger lands are highly fragmented. The modernization like use of tractors etc become difficult. The social factors also play a role here where in some states people could use combined effort with cooperatives etc but rest could not. The land reforms which started in 70s were ignored in almost all of India except in left ruled states of West bengal and kerala. There is a need to keep them in focus with modernization of land records. The land owners today can not give the land for farming to others while they could move to better jobs in urban areas. We need to give permission for leasing of land and better prtection to land owners. Moreover we need to provide other employment opportunities than agriculture to poor rural people which can be done with micro finance to Self Help groups etc to create self employment to themselves.
2. Manufacturing : Indian economy is ailing due to very less growth in this sector. The main reasons have been low labour productivity and lack of infrastructure. Experience from other countries like China, S. korea, Indonesia has shown that the best way to increase labour productivity is to invest in the physical capital per worker which means more saving and investment and increasing the Total factor Productivity (TFP) by using better technology, organizational capabilities etc. Skill development is of utmost importance so that we can actually use the demographic dividend. It is also important as we need people to shift from low value agriculture to higher sectors. The infrastructure in terms of energy, roads etc has created bottlenecks. Land acquisition and environment clearances remaining major hindrances. Though the second part has now largely been taken care of by formation of Cabinet Committee on Investment , the bill for first is still pending in parliament but is likely to be cleared this budget session. Also we shall give attention towards large number of Micro Small & Medium enterprises (MSMEs). Moreover, we need to develop bond capital market for big industries so that the capital in banks can be free for MSMe's use.
3. Services: This sector has remained a strong pillar in Indian GDP growth since liberalization and more so in last decade. It creates high value jobs and has high productivity but there is very low growth in addition of jobs here. The sector can be divided mainly in 4 parts as : Trade, hotels, restaurants ; Transport, storage &communication ; Financing, Insurance, real estate & business services and Community, social & personal services. The first shares the largest pie in services. Organised retail penetration is low but with recent FDI permission of 51% in multi-brand and 100% in single brand retailing, the gap may narrow down in future. Bharti-walmart, carefour in former and players like zara, marks&spencers in latter has huge plans for expansion. Tourism has greatest potential in services with india having a meager 0.64% of international tourist arrivals in the world. There is also a potential in domestic arrivals. After medical tourism in south there is scope for adventure tourism in north east. Multiple taxes may be limiting the growth in this industry. In trade there is a need to upgrade the ports and increase the shipping fleets. In the housing sector we need better credit facilities, repealing of acts like ULCRA , lower stamp duties and easy land acquisition. Business services include R&D , IT services etc.
India has sustained rapid growth of GDP for most of the last two decades leading to rising per capita incomes and a reduction in absolute poverty. Per capita incomes (measured in US $) have doubled in 12 years
But India has one third of all the people in the world living below the official global poverty line. It has more poor people than the whole of sub-Saharan Africa
Per capita income is $1,270, placing India just inside the Middle Income Country category
India's per capita income is 1/20th that of the UK
Life expectancy at birth is 65 years and 44% of children under 5 are malnourished. The literacy rate for the population aged 15 years and above is only 63% compared to a 71% figure for lower middle income countries.
Despite a strong attempt to become an open economy, exports of goods and services from India account for only 15% of GDP although this will rise further in the years ahead
India runs persistent trade and fiscal deficits and has suffered from high inflation in recent years
India's growth rate has slowed and high inflation is a constraint on competitiveness and growth.
Investments by Indian businessmen abroad have overtaken foreign direct investment for the first time – reflecting a lack of confidence among Indian entrepreneurs about their home economy
Development path
India has followed a different path of development from many other countries. India went more quickly from agriculture to services that tend to be less tightly regulated than heavy industry. That said there are some emerging manufacturing giants in the Indian economy.
Supply-side factors supporting Indian growth and development
A fast-growing population of working age. There are 700 million Indians under the age of 35 and the demographics look good for Indian growth in the next twenty years at least. India is India is experiencing demographic transition that has increased the share of the working-age population from 58 percent to 64 percent over the last two decades.
India has a strong legal system and many English-language speakers – this has been a key to attracting inward investment from companies such as those specialising in IT out-sourcing.
Wage costs are low in India and India has made strides in recent years in closing some of the productivity gap between her and other countries at later stages of development.
India's economy has successfully developed highly advanced and attractive clusters of businesses in the technology space – witness the rapid emergence of Bangalore as a hub for global software businesses. External economies of scale have deepened their competitive advantages in many related industries.
Growth and Development Limiters for India
Despite optimism for India's prospects for economic growth and development, there are a number of obstacles which may yet see growth and development falter.
Poor infrastructure - notably in transport and power networks
Low productivity and weak human capital. A high % of workers are low-skilled and work in small businesses
High inflation and a persistent trade deficit
Low national savings as a share of GDP, low share of capital investment
Relatively closed economy - India is a net importer of primary products
Indian Development – An Infrastructure Gap
India is a good case study to use when discussing the problems that persist when a country cannot rely on adequate critical infrastructure such as roads, railways, power and basic sanitation. India wants to build $1 trillion worth of infrastructure in the next five years but the government expects the private sector to fund half of it – this is unlikely! Poor infrastructure hurts the Indian economy in numerous ways:
Causes higher energy costs and irregular energy supplies for nearly every business and especially India emerging manufacturing sectors – there were huge power black outs in 2012
It is more expensive to transport products across the country and it creates delays at ports hamper export businesses and delays at airports which increases the cost of international freight.
It makes India less attractive to inward FDI
It adds to the cost of living and limits the extent to which millions of India's lowest income families can escape extreme .hi
A creaking infrastructure damages the reputation and potential of India's tourism industry
Despite these growth constraints, India's expansion far exceeds that of the vast majority of developed nations – to put this into some context, India is delivering 30 years of US economic advance every ten years!
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