Indian Economy- Challenges of Sustaining Trillion Dollars Economy...

INTRODUCTION

It was the glorious day of 15^th Aug 1947, which not only brought us independence but also marked the beginning of a new financial era. We started our economy with a zero external debt and our Rupee stood strong enough at par with the US$. On April 2007 we joined as the 12^th nation in the Trillion Dollar Club with other countries namely, the US, UK, Japan, Germany, China, France, Italy, Spain, Canada, Brazil and Russia. But due to decaying political scenario and brazenly rising inflation the ailing rupee has severely tumbled down and facing its lowest on 64.55 INR per US$ today and a per capita debt of Rs.33000 on every Indian. 28 paise in a rupee of budget source is from borrowing and 18 paise in a rupee spent is towards interest payment. In this situation definitely a question comes in the mind can we sustain our trillion dollar economy ?

MEANING OF TRILLION DOLLARS ECONOMY

What is the meaning of this Trillion dollar economy ? It is the value of the Gross Domestic Product or to say the sum total of our GDP crossed one trillion dollar. India achieved this land mark when one US$ was Rs.41, means our GDP on that day exceeded 41 trillion rupees.

Over the period 1960 to the late 1980s, India’s GDP in US dollar terms doubled every nine years on an average and then, improved to around 5 years, resulting from structural reforms. Now the GDP is 1.84 trillion and is expected to cross 3.4 trillion mark by 2015-16, within the span of the current Five Year Plan. Therefore, we should think about exploiting the opportunities and preparing ourselves for the challenges of managing a multi-trillion dollar economy.

WHY SHOULD WE DOUBT THE SUSTAINABILITY?

Along with the lower growth of rate of GDP of 4.8% and higher interest for the borrowed capital, the main reason for which now fear is generated is the fall in value of INR with respect to US$. As it is increasing our total external debt, cost for imports and interest payable in term of INR our heart beat is increasing.

Challenges, opportunity and remedies

The main challenges are the poverty, unemployment, shortage of skilled personel, illiteracy, urbanization problem, infrastructure deficit, Capital deficiency and good governance which are to be given importance for sustaining this Trillion Dollar economy.

At the grassroots level, India continues to be a poor and less developed. No goal can be achieved in the absence of poverty alleviation. Extreme poverty and deprivation discourages to participate in programs not providing immediate support to livelihood. Due to high population growth rate, large workforce still dependent on agriculture. Heavy dependence on agriculture is a symptom of poverty- Indian Agriculture contributes 15% of the GDP and employs 55% of the population creating disguised unemployment. We have to get people out of it, and provide them other employment. Industrialization will help to create middle level job and migration.

We need to recognize that the knowledge, skills and productivity of our growing young and dynamic work force forms the backbone of our economy. We need to strengthen ITI and vocational education system. Expenditure on education, research and development is to be increased. Despite the increasingly higher numbers of engineering graduates produced by the technical institutes in India, almost 30% are remaining unemployed or employed in other non technical jobs. In 2005, a study indicated that only a quarter of India’s technical graduates and 10-15 per cent of general college graduates are of employable quality. The research also showed that doctorate degrees were less than 1 per cent of graduate engineers, very less in comparison to other developed countries. In 2009, World Bank expressed the view that acute shortage of skills especially in the area of civil engineering shadows the growth prospects of the Indian economy. So quality engineers are to be produced with an affordable cost.

In India in 1991, there was 26% urbanization now it is 37%. Still it has to go a long way. The problems that we talk about urbanization, are our managerial problems, we need to get rid of them. Urbanization is inevitable for a growing economy.

We do not have enough infrastructure in the economy to sustain a trillion dollar investment in next five years. The infrastructure sector was one of the thrust areas in the Union Budget 2012-13 and 13-14. Anyway India has witnessed considerable development in physical infrastructure in the past decade. Both the government and the private sector need to work towards overall infrastructure so that it can sustain 8-9% annual GDP growth. Even though private public partnership is relatively new to India, it has shown decent results and has a potential to grow. 30% share of Private sector in Transportation and a 34% share in power sector is a good sign for our economy. The development of airports and roads is a classic example of the potential of PPP in India. But there are still some regulatory issues that need to be looked at and changed. Agricultural infrastructure to be strengthens to reduce the prices of essential food items.

India, post liberalization, has not only opened it's doors to foreign investors but also made investing easier. Opportunities abound in India, which has the world's largest middle class population of over 300 million, attracting foreign investors by assuring them good returns. Investor confidence approach is very robust expecting to see 15% increase in FDI in 2013, Now, the question is no longer of scarcity of capital but the rate of return that we can pay on this capital.

In my opinion there are three mantras-

1.    Reduce the interest burden by reducing the debt and increasing the equity through FDI.

2.    Promote export- explore new market

3.    Find substitute for import – focus more on renewable energy, be self dependant on Food grain, try to utilize own resources.

CONCLUSION

Actually, we lack confidence. Existential crisis is our national disease. Our biggest myth as a nation is that we believe that the government runs the economy, not people. It is difficult for us to see that what we do, at schools, colleges, offices, factories adds up and decides the fate of our nation. It is truly said 'Agar apa sab sirf apna kaam hi theek se kar le toh desh eisehi aage badh jaayega'. And imagine what we could do with the vast knowledge we have. Let us think two minutes to that imagination.