Huge presence of public sector stagnating economic growth, says Ruchir Sharma

The overwhelming presence of the public sector in India is holding back the economy, noted Ruchir Sharma, Head of Emerging Markets Equity and Chief Global Strategist, Morgan Stanley Investment Management, while delivering a lecture on leadership, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) to commemorate its 90th anniversary this year. As part of his address, Ruchir outlined the 10 rules that need to be assessed over a time period of five years to determine an economy’s current and future outlook, including politics,

role of state, income inequalities, concentration of wealth from a geographical standpoint, investment, inflation, exchange rate, kiss of debt, demographics, and curse of the cover story.

With regards to the role of politics, it has been noted that reforms tend to

be taken up in the initial two to three years of a new government. Subsequently, the reform momentum slows down. India, on this account, ranks 6 on a scale of 1 to 10, he said. In India, there is a great disparity of wealth, with no new cities being added in the last two to three decades. According to Ruchir, emergence of new cities and urbanisation are needed for distribution of wealth. On the inflation front, Ruchir highlighted that the rates have vastly improved over the year, from an all-time high during the second tenure of the UPA government, to being curbed within the projected rate of 4 percent.

Although manufacturing plays a key role in the success of a country, Ruchir noted that a commoditybased economy would do good in the short-term only. While India’s current level of private debts offer a scope for growth, Ruchir said a sharp increase in debt can be detrimental to the economy.