Business Education Technology

Seven Red Flags That Can Sour India’s Growth Story

By Balbir Punj The 2024-25 budget is a smart fusion of political stratagem, coalition compulsions and a slew of deft moves to accelerate economic growth to help realise PM Modi’s resolve to turn India into a developed nation by 2047. However, given the domestic constraints and dismal emerging global economic scenario, the NDA Government’s quest to make India a global financial powerhouse is fraught with serious challenges. The wars in Ukraine and Gaza have disturbed global supply lines and devastated the world markets a great deal. No wonder the latest forecast for global growth five years from now, at three per cent, is the lowest in decades. The rise of India would be hamstrung by a bleak international scene, for a vibrant Indian economy will need to increasingly engage with the rest of the world. The budget is undoubtedly an exercise to retrieve the political ground the BJP lost to the opposition in the last Lok Sabha polls. But it’s not populist or irresponsible. The underlying theme is fiscal prudence and consolidation. The promise to peg the fiscal deficit at 4.9 per cent of GDP in 2024-25 is a significant reduction from 5.6 per cent last year. Finance Minister Nirmala Sitharaman has also reiterated her resolve to reduce the deficit to below 4.5 per cent by next year. The misgivings about India emerging as a developed nation over two decades from now aren’t entirely misplaced. India faces some insurmountable challenges that are difficult to deal with, particularly with a fractured polity that has evolved post-2014. Outrageous toxic narratives – completely divorced from facts and reality – are banded about to derail the public discourse. ‘Caste-identity’ – a divisive signature tune – is the season’s flavour. What’s the basis for believing that Modi’s vision of a developed India is not just a pipe dream but something doable? His track record. During his previous two terms, Modi managed to break the mould. Defying the system, he ensured the delivery of benefits to ordinary people sans any leakage. Modi made available gas connections, foodgrains, toilets, housing, drinking water, and road connectivity to crores of Indians. As a result, poverty levels dropped drastically, and today, India is among the world’s fastest-growing large economies, with a GDP growth above eight per cent. But here is the proverbial catch. The aspirations of millions who have moved out of morasses of poverty have since outgrown what the state freebies can offer. This exploding phenomenon is full of unchartered challenges and unexplored opportunities for the country. The expectations of India’s young millions have soared to unprecedented levels. They now want access to a decent standard of living. But can India meet their aspirations? Seven red flags can hold the country back and sour its dreams. #Education and Jobs: Among the “real” challenges India faces, the Economic Survey (2023-24) has outlined the lack of jobs. According to the survey, the country must create an estimated 78.5 lakh jobs annually. The government has launched five schemes to fix the problem. It’s a patchwork solution and leaves the core of the problem untouched. The issue is not unemployment. It’s that of ‘unemployable’. Leaving aside some islands of world-class academic excellence, most organisations styling as educational institutions don’t dispense education or talent but degrees. The state-run educational system is broken. There is no serious effort to resurrect it. According to the 2023 Annual Survey of Education, almost a quarter of all youth (14-18 years) cannot fluently read a class 2 text in their regional language. Only 43% can solve simple division sums. There are millions of slots waiting for qualified candidates. India ranked seventh in a talent shortage, with 81 per cent of employers reporting difficulty finding a skilled workforce. The skill gap is estimated at 2-2.5 million. It’s difficult to miss the irony – millions of jobs are going abegging, and countless remain unemployed. Rising Trade Gap with China: India-China trade touched almost $118 billion, with India’s exports at only $16.67 billion, with a trade deficit of over $100. The Economic Survey has termed it a “challenge”, a “Chinese Conundrum”, and a problem sans a solution. There appears to be no escape from the fact that China would continue to be the overbearing trade partner, with sinister implications for India’s security. Bureaucracy: Rampant corruption and inefficiency have been India’s bane. To Modi’s credit, corruption is nearly extinct in the top echelons of politics and babudom at the centre. However, the twin evils of graft and sloth continue to gnaw at the system from within. The raging NEET controversy and the scandal involving Puja Khedkar, a probationary IAS officer (now under investigation), underline the unsavoury fact of the extent to which the rot has set in. No plans, however perfect they may be, can work till the delivery mechanism is fixed. Judicial Reforms: To repeat an adage, justice delayed is justice denied. These statistics speak for themselves. In 2024, the total number of pending cases of all types and at all levels stood at 5.1 crores, including over 180,000 court cases pending for more than 30 years in district and high courts. Agriculture: The growth in agri-GDP in 2023-24 (FY24) was just 1.4 per cent as per the latest provisional estimates. The second advance estimate was, in fact, only 0.7 per cent. This sector engages 45.8 per cent of the workforce. Most of those claiming to be ‘kisans’ are, in fact, victims of disguised unemployment. Giving 5 kg/per capita/month of free rice or wheat is a dole. Vested interests (read so-called farm protests of 2020-21) successfully sabotaged all efforts to introduce reforms in this sector. This large section of India’s population has to be partnered in the country’s success story. Distorted Narratives: Foreign-funded groups have been hijacking popular mandates using globally tested tool-kits by building narratives based on white lies, half-truths and twisted facts. The ‘toolkit’ was used during India’s CAA and farm law protests. Power Outage: Per capita electricity consumption in India jumped from 16 units in 1947 to 1327

Business Education Geopolitics Leadership Policy Technology

731

Five big ideas to make Bharat a developed nation @2047!

K.A.Badarinath Niti Aayog in consultation with stakeholders has been readying a vision document for Bharat to evolve as a developed country in 25 years from now. This document is expected to be unveiled by Prime Minister Narendra Modi in 90 days from now. Bharat celebrates 100-years as an independent nation in 2047 free from clutches of imperialistic British rule. By then, the country will have to implement a flawless plan to not fall into classic middle-income trap and emerge as a thriving developed economy. Given that independent consultancies and multi-lateral funding agencies foresee possibility of becoming a developed country, getting there seamlessly is what the government may have to work on. For this to happen, primacy must be on moderating rising cost of goods and services and at the same time sustain quality, quantity and price competitiveness for these items apart providing access to Bharat’s market. A national debate may have to be kicked off by Niti Aayog to get the strategy right instead of limiting their consultation to a powerful few that matter today. Fresh ideas and concepts need serious consideration to bolster moves to turn Bharat into third largest economy with US $ 30 trillion size overshadowing Germany and Japan by 2030. Here are the five big ideas that CIHS offers: Economy’s fourth pillar: Economic restructuring is something that needs to be undertaken urgently and expeditiously thereby preparing the ground for transformation into a developed country. For that to happen, fourth pillar of the economy needs to be built painstakingly. Grassroots businesses, cooperatives, producers’ organizations with direct linkages to consumers may have to don this role. Many of these consumers may also be business partners of these enterprises. Foreign, domestic, public sector investments apart from household savings and spending through annual budgets by states and centre may not suffice to trigger the transformative change that Bharat is aspiring for. Carving out at least 500,000 grassroots cooperatives in select sectors to provide goods and services, undertake exports and provide jobs may have to be scientifically designed. Bharat needs to be designed as the ‘largest participative economy’ that’s not constrained or limited by stock markets, portfolio investors, domestic savings or foreign funds. A large number of big, medium and small profitable enterprises in cooperative sector that are essentially rural will have to emerge and take the lead in next phase of economic expansion. Extending beyond possible 50 lakh street vendors, 66 lakh loans and a measly Rs 8600 crore is something that Bharat has to plan for at grassroots. From banking, insurance, pension funds to home grown low cost, home or family based enterprises run on the spirit of cooperation and sustainability is what Bharat may have to design. Recalibrating defunct or loss-making cooperatives by inducing professionalism and spirit of enterprises may be the starting point. Bharat’s government at centre, states and local bodies or district administration will have to collaborate to rejig the cooperatives and establish 500,000 new enterprises that are worth billions of dollars. Antyodaya: Reaching out to last individual standing in the line should form bulwark of the restructuring plan that takes Bharat to aspired third position in global economic pecking order. In the spirit of Antyodaya, broadening and deepening economic growth story to turn ‘all inclusive’ from spread of prosperity to providing services at lowest strata of village panchayats is something Bharat can work on. If message of ‘Bhagwan Ram’ can be taken to 500,000 villages to mobilize support for construction of a grand temple at Ayodhya on mission mode, there’s no reason why the ‘Antyodaya’ movement cannot methodically reach these far-flung places and people in seven years. Like Ram Lulla signifies unification of a diverse Bharat’s society, Antyodaya should serve as unified economic emancipation and empowerment plan. Antyodaya cannot be limited to a ‘food scheme’, ‘skills development or a couple of projects in states or centre. An economic model that allows uplift of people at lowest strata in a protracted but sustained way needs to be rolled out by both central government and states in the spirit of ‘team Bharat’. For too long, there has been debate on ‘Antyodaya’ as the clinching factor in economic transformation, both in right wing and Left of centre political formations. Getting the model right is the key and implementing ‘Antyodaya’ taking each family as a unit to building clusters of self-ruled and sustained villages. This would translate to decentralization and democratization at lowest in the economic pyramid. 100 big Indian brands & companies: Can we take this economic change to a different level? In next seven years, can we build 100 known desi global brands for goods and services consumed in at least 25 countries each? Should we not chart a plan to build at least 100 large trans-national behemoths that account for about $ 10 trillion? Do our enterprises have the heft to get there and be there in the reckoning? Big question therefore is when do we build our own ‘Apple’ kind of a trillion dollar enterprises? Let’s concede that unless wealth is produced, democratically spread and celebrated, this cannot happen. From banking, insurance, pension funds to iconic products and services can be ‘Made in India’ for the world, owned by Indians that showcase them with pride. Identify at least ten sectors in which the transformation that can be achieved by drawing up fool-proof plans. Here again democratization of these giant enterprises is what can be attempted with millions of stakeholders controlling the wealth. Strategic investment plans: Investments and businesses can be dovetailed to suit Bharat’s strategic futuristic plans. This involves careful assessment of Bharat’s interests, both offensive and defensive, to ride on the right horse. Chinese Communist Party has made strategic investments globally to suit President Xi Jingping’s aspiration of ruling the country for life time. In Bharat’s context, it cannot be individual centric but role the country would play internationally, both soft and strategic. Identifying a dozen areas with strategic interface and clear goal posts set for these enterprises may have to be readied

Business Leadership Policy Technology

566

Basking under the Sun!

India to hit a hat-trick as fastest growing economy, unparalleled transformation in nine years, per capita incomes to be $ 5200 by 2032. K.A.Badarinath For second year in continuum, India is the fastest growing economy globally with impressive 9.1 per cent and 7.2 per cent clocked in 2021-22 and 2022-23 respectively. Even with projected 6.5 per cent GDP growth for this fiscal ending March 31, 2024, India will top the global sweepstakes and hit a hat-trick. This means the moon for an economy that’s home to world’s largest population at 1.4 billion, an expanding aspirational class and the middle-income families that continue to move upward in the consumption and investment chain. From investors’ point of view, both domestic and foreign players would make merry given the healthy uptick in demand for goods and services within the country. This is significant as Germany has slipped into recession, top economies in Europe are on a downslide and the US continues to struggle out of a whopping $ 31.4 trillion debt crisis. The tentative deal between democratic White House and Republicans do not mean much given that President Joe Biden is in a tight corner. Prolonged war in Eastern Europe getting worse and Kiev’s drones hitting Moscow’s metropolis send out two firm signals. One, the shadow-boxing by big boys with Russia and Ukraine playing front foot continues to adversely impact geo-political and economic matrix. Secondly, there seems to be no abrupt end to this long drawn conflict notwithstanding peace overtures made by Indian Prime Minister Narendra Modi. Its impact is bound to be significantly felt as the global growth figures are expected to trim to 2.8 per cent in 2023 as against 3.4 per cent a year before. In the melee, Indian stock markets being valued fifth largest globally at $ 3.3 trillion after US, China, Japan and Hong Kong is something that one can rejoice about. It only indicates the investment appetite of both foreign players and domestic retailers that yearn to dip into the famed India growth story that’s only getting meatier by the day. Also, the confidence that investors repose in our regulator, Securities Exchange Board of India to run the show with zero payment defaults apart from strong and stable central government that commands huge credibility politically and with economic stakeholders. Three prime numbers that stand out are services, exports and agriculture sectors contribution to healthy GDP growth beating doomsayers’ diatribe on economic mismanagement. Secondly, front loading capital expenses and big private consumption has fuelled the Indian economy. Gross fixed capital formation at 11.4 per cent was highest in over a decade and its share in GDP accounting for 34 per cent. Private consumption rose by 7.5 per cent and its share was highest at 58.5 per cent. Most important signal in the macro-economic numbers was the confidence within the economic managers of Modi government that inflation can be contained to four per cent going forward. Unexpectedly healthy GDP numbers have special significance for Indian government led by Prime Minister Modi who has led from the front in last nine years. This bears out in the American financial services Morgan Stanley’s report released on Wednesday on nine years ‘transformation’ heralded by team Modi. Reforms undertaken across sectors in last nine years including governance laid the foundation for enhancing the per capita income to $ 5200 by 2031-32 from $ 2200 reported in 2021. And, over 46 per cent households would earn anything between $ 10,000 – 35,000, nearly double the proportion in 2021. Most important is that capital expenditure and fixed capital formation is expected to grow exponentially as percentage of GDP and share of Indian exports double to 4.5 per cent by 2031. As pointed out by government’s economy managers, scams and corrupt deals that marked 2004-14 decade are a thing of the past. From lost decade to performing and transformative ten years is what even Morgan Stanley seems to have surmised in its detailed report. Fourteen quarters of runaway inflation and 12 quarters of decline in economic growth and industrial production during 2004-14, pre-Modi era stands out as it culminated to virtual financial collapse that was triggered by the housing bubble burst in US that burnt the world with its contagion effect. Change is order of the day and India has arrived leaving behind the dark days! (author is Director & Chief Executive of Centre for Integrated & Holistic Studies, a Delhi based non-partisan think tank)

Business Leadership Policy

607

Make the best with change in mind-set

Cooperatives can deliver $ one trillion economic expansion; provide work opportunities to millions and fuel boom in grassroots firms K.A.Badarinath Fourth pillar of Indian economy is on the resurrection mode. From state-owned public undertakings, private and foreign companies, cooperative enterprises considered as fourth engine of economic growth are in for a big makeover. Taking cooperatives seriously as grassroots enterprises to spur rural economy, create jobs and add rural wealth to India’s growth heft was something long overdue. And, this government seems to have got its heart and soul at the right place to revive the cooperative enterprises and help achieving double digit growth and take Indian rural people global. A year-long drive to rejuvenate these enterprises with huge potential across a dozen sectors in the spirit of ‘antyodaya’ as envisaged by Maharshi Arbindo and Vinoba bhave of ‘Godan’ fame is timely. Narendra Modi government’s two decisions in cooperatives sector last one year stand out especially the the rural enterprises that are mostly agricultural primary credit societies. As per government’s own data, over 36,000 such societies have turned dysfunctional with many of these enterprises unviable. Its decision to shut down cooperatives that are untenable is a good beginning to reform the sector that can boast of only half a dozen large multi-state enterprises that are really successful. But, 13-crore members’ network across 99,000 primary credit societies has every chance to add economic muscle to the Indian growth and bring about fundamental change in rural hamlets across the country. Revival of the primary credit societies also will have cumulative effect with balance sheets of 352 district central cooperative banks improving and 34 state cooperative banks getting healthier. These banks have had refinanced or recapitalized thousands of primary credit societies with Nabard’s funding support. Many of these banks were also in doldrums owing to losses or unrealized funds lent to the societies. Integration of these credit societies with focus on core agricultural lending with dairy cooperatives with 1.5 crore membership in two lakh cooperative enterprises would help diversify the risk and open up new business opportunities. Bringing in over 25,000 fisheries cooperatives with 38 lakh members would culminate into the grass roots enterprises taking up multi-modal business activities. This week’s decision to set up two lakh such multi-modal primary credit societies in agriculture, fisheries and dairy sectors over next five years would be an ice-breaker given that they can be carved out into sustainable companies and help reach out to last man standing. These new enterprises would help spread the cooperatives to 1.6 lakh panchayats without primary agriculture credit societies and two lakh villages or clusters without dairy linkages. Multi-ministerial coordination, phasing out overlap of infrastructure and judicious utilization of meagre resources making the new age cooperatives as enterprises for different products and services marks shift in economic pendulum. Harvard bred economists like Dr Manmohan Singh, Montek Singh Ahluwalia or Palaniappan Chidambaram had never believed that cooperatives and rural economic activity could be a game changer. These market and corporate protagonists may actually be irked by the policy shift relating to cooperatives. But, there’s no point in making them believe that cooperatives can deliver big time at grassroots. In fact these ‘highly respected western educated minds’ made fun of the Atal Bihari Vajpayee’s ‘Antyodaya’ anna yojana to feed the perpetually hungry poor people in India’s hinterlands. Their tribe had scoffed at the very thought of taking economic activity to villages in the spirit of anthyodaya as propagated by philosophers – thinkers, Dattopanth Thengdi and Deendayal Upadhyaya. Most significant in the entire strategy to revitalize cooperatives was to rope in successful companies like National Dairy Development Board and National Fisheries Development Board (NFDB) in bringing about sustainable change in the way cooperatives operate on ground zero. Their experience, expertise and reach would only help evolving sustainable grassroots enterprises in cooperatives in the new age. The new policy envisages bringing over 25 business activities under the roof of new age cooperatives. From cooking gas to petroleum products, food grains, fertilizers to seeds, fair price shops to community irrigation have been enlisted as business activities of these cooperatives hitherto segregated under either dairy development or spread of credit. While the new cooperatives policy is yet to take complete shape, setting up a dedicated multi-state enterprise to push grass roots products and services into export markets is yet another milestone in the policy shift heralded by the government. Several countries in Europe like France, Germany; Australia, Canada and Japan have sustainable cooperative models especially catering these countries exports basket. From banking, finance, insurance, pension funds, dairy to agricultural products and services, cooperatives have been the vehicles in these countries exports and domestic consumption. As per World Cooperatives Monitor of 2020, just the top 300 enterprises in this sector account for a whopping US $ 2.146 trillion economic activity. Cooperatives globally provide work opportunities to about 10 per cent of total employed personnel. If one were to go by figures of International Cooperatives Alliance, three million enterprises have over 12 per cent humanity as their stakeholders. A billion members of these cooperatives is what translates to large chunk of economic activity and trade is many countries. In the transformative shift that cooperatives are expected to undergo, a few riders are what matter the most. Hand holding and facilitation by creating conducive environment is what government’s role should be limited to. Allowing them to make most of the opportunities in rural India is what the bureaucracy will have to do. Strangling these new age enterprises with politicians or bureaucrats may not work. Past experiences cannot be forgotten in a hurry. Let’s not ignore what happened to IFFCO. There were several attempts by different governments to effectively make it a state-run enterprise by default. Resistance put up by then Fertilizers minister Ram Vilas Paswan to cut IFFCO’s umbilical cord with the government when the cooperative enterprise made desperate attempt to return the government’s paid up capital cannot be set aside. While IFFCO managed to retain its core cooperative

Blog Post

Seven Red Flags That Can Sour India’s Growth Story

Five big ideas to make Bharat a developed nation @2047!

Basking under the Sun!

Make the best with change in mind-set