There may be a way for In­dia to achieve dou­ble-digit eco­nomic growth

Tehran Times - - ECONOMY -

In­dia surged ahead to be­come the world’s fastest-grow­ing ma­jor econ­omy in the last quar­ter of cal­en­dar year 2017. But the South Asian giant can do even bet­ter, po­ten­tially even hit­ting dou­ble-digit growth rates, ac­cord­ing to one busi­ness leader.

This ar­gu­ment rests on the back­ground of “an al­ready ro­bust growth rate hov­er­ing around seven per­cent, sup­ported by reg­u­la­tory de­ci­sions that favour man­u­fac­tur­ing” to cre­ate jobs as well as busi­ness-friendly pol­icy more broadly, Anil Rai Gupta, chair­man and man­ag­ing di­rec­tor at In­dian elec­tric­ity giant Havells, said.

“To achieve GDP (gross do­mes­tic prod­uct) growth of 10 per­cent, In­dia would need the ser­vice sec­tor to grow close to 20 per­cent com­ple­mented by four and eight per­cent growth in agri­cul­ture and in­dus­trial growth,” he told CNBC via e-mail on Tues­day, adding that In­dia’s eco­nomic fun­da­men­tals were strong enough to achieve that.

The “Make in In­dia” cam­paign and the coun­try’s young de­mo­graph­ics “will not just draw a bet­ter con­sump­tion pat­tern for the coun­try but also push the over­all growth rate to­wards the dou­ble digit mark,” he ex­plained. In­dia is the world’s sec­ond most pop­u­lous na­tion af­ter China, with ap­prox­i­mately 1.3 bil­lion peo­ple.

In­dian Prime Min­is­ter Naren­dra Modi’s gov­ern­ment has im­ple­mented two ma­jor eco­nomic changes in the past 18 months — though the re­forms’ chaotic in­tro­duc­tion ini­tially hit eco­nomic growth. In Novem­ber 2016, it was an­nounced at short no­tice that 500 and 1,000 ru­pee notes were to be with­drawn from cir­cu­la­tion in an at­tempt to curb coun­ter­feit­ing. July last year marked the in­tro­duc­tion of the Goods and Ser­vices Tax, uni­fy­ing sales tax across all In­dian states.

But, for an­other ex­pert on In­dia’s econ­omy, the ceil­ing on GDP growth is due to the coun­try’s man­age­ment of its la­bor force.

“In­dia cer­tainly has the la­bor force to grow (its econ­omy) that quickly ... and it is young,” Derek Scis­sors, an ex­pert on the In­dian econ­omy at U.S.-based think tank the Amer­i­can En­ter­prise In­sti­tute, told CNBC via e-mail in March. Still, he ex­pressed skep­ti­cism that the pop­u­la­tion was be­ing put to ef­fec­tive use.

“A very large chunk of the la­bor force is stuck on very small plots of land pro­vid­ing no value added,” he said. “La­bor laws re­quir­ing gov­ern­ment ap­proval for fir­ing any­one from a medium-sized or large firm dis­cour­age hir­ing.”

“In­dia can grow faster than at present but there’s no ev­i­dence (the coun­try) can hold 9 per­cent GDP growth, and cer­tainly not 10 per­cent,” Scis­sors ar­gued. “As soon as it gets into the 8s in­fla­tion spikes be­cause sup­ply ca­pac­ity is in­ad­e­quate to meet that pace of de­mand in­creases.”

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