On 15 June, As though responding to sceptics via policy makers, Prime Minister Narendra Modi said the goal of making India a $ 5 trillion economy by 2024 was challenging but surely achievable. The pit-stop described, is in 2024, at the end of Modi 2.0. And the chequered-flag finish-line of this Maserati race to the top is in 2029. That is just 10 years from now. Quite a lot of the underlying calculations, for 2024, let alone 2029, are to do with the relative strength of the Indian rupee vis a vis the US dollar. The rupee has moved up and down as much as 20% against the dollar of late. Would this volatility cease if it were to become fully convertible?
And, of course, all the projections assume inflation stays range-bound in and about 3% to 7%, most happily at no more than 4%.
We have already come a long way economically from 1947. The pace has picked up since the 1980s, and particularly since 1991. But, looking at 2019, a full 28 years on, a part of the potentials has certainly been realised, but we have still got a long way to go.
India will have gone from the fifth largest big economy in 2019 to the third in “nominal” or absolute dollar terms by 2029 if the projections come true. On a Purchase Power Parity (PPP) basis, often used to describe things in the emerging economies, we could be reckoned as at No.1, ahead of both America and China.
But a lot of this kind of speculative economic gaming is of little practical value. It may entertain seminarists when dressing up in appropriate jargon, but it won’t get us one jot closer to our stretch targets.
It will take a sustained 12% compounded growth in the economy year-on-year from now when we are at $ 2.8 trillion GDP. The economy grew at 5.8% in the last quarter. This fiscal’s whole year statistic will probably pan out at 7%, though a range is forecast between 6.9% and 7.2%.
So how do we nearly double it, and then hold steady as she goes? While it is true that unleashing the power of the MSME/’unorganised’ sector that employs 80% of those who have jobs, is much talked about by leftist economists; this is a task strictly for the big boys.
The task force working on ideas — economists, the industrialists they consulted, and commerce ministry bureaucrats, the Department of Industrial Policy and Promotion or DIPP — has laid out a mass of incremental measures and hopes. These include tired clichés on how to get the agriculture (cold chain) and manufacturing sectors to deliver $ 1 trillion each.
The services sector, a vague catch-all for everything else from arbitration and mediation services, audio-visual services, auditing, visas etc. to provide the other $3 trillion.
There is no accounting for bureaucratic lag-time, which usually spoils any government created a timeline.
The one real thing is the emphasis they have put on defence-related Make in India, though it totals — the technology transfer, the offsets, the incentivised lures — along with electronics, auto parts and the like towards the same manufacturing $1 trillion.
Growing at a compound 7% might just be possible, despite a slowing economy, by providing facilities to the small-scale entrepreneurs, and all things suggested by the DIPP, but then it would take 10 years just to get to $ 5 trillion whereas the prime minister is looking at $ 10 trillion in that timeframe.
To do it in half the time, can only come about using the biggest Indian enterprises in collaboration with foreign ‘greenfield’ investment on a scale involving trillions of dollars.
Quite a lot of the foreign investment may have to be let in with 100% foreign ownership as well. This is mainly possible in the high unit-cost defence manufacturing sector and the nuclear power sector. These two alone could absorb the trillions needed. Huge facilities would have to be set up and, yes, employment for some millions would result. These would be for all the 28 or 30 nuclear power plants needed currently to supplant some of the power generated using fossil fuels. These would have to start being put together not in ones and twos over decades, as at present, but simultaneously, to be finished and commissioned in 24 months.
Facilities for major armaments and componentry/spares, such as missile shields, AWACS, fighter, bomber and transport planes, helicopters of all kinds, battle-tanks, howitzers and field guns of different ranges, machine guns and rifles, armoured carriers, submarines, aircraft carriers, navy frigates, ammunition and missile production facilities to service all this modern hardware would have to be put in all together.
Much of this would come to Make in India quite readily, as long as we guarantee offtake. If we diversify sourcing between America, Israel, Russia, China, North Korea, and Europe – including Britain, France, Sweden, Spain, for example, we will have considerable strategic depth.
Besides, most developed countries earn their highest revenues and profits from the sale and export of their defence equipment, and India must do likewise in due course. In fact, quite a lot of this defence industry capacity and R&D, in collaboration with the world’s leading manufacturers, would also have to be for export to be viable.
And nuclear power in abundance will not only assure investors of the electricity they need but put paid to high power prices from the extensive use of fossil fuel for its generation.
At the same time, our new manufacturing in 2019 and beyond, not hamstrung by legacy issues, can take on as much high technology as possible. This, in order to be relevant, price-competitive, cutting-edge, efficient, attractive, and in demand.
India should also press ahead with as many megaprojects as a possible calling, once again, on foreign capital and expertise to do so. This is because only the investment on a huge scale can get us to $ 5 trillion in the record time stipulated.
These must include speeding up all work related to the multiple railway-freight corridors and bullet trains. We must build all the tunnels and bridges we need, both for road and rail.
The new Water Ministry is very timely, too. It should undertake, quite apart from water conservation measures and reviving of water bodies in dry States, the massive dam work and other channelling programmes on utilising the waters of the Indus Water Treaty.
This must begin with what portion of the water is currently India’s share as announced some time back. But later, it should extend to other portions of the water as necessary by abrogating the treaty.
India must do likewise on the Brahmaputra to prevent the periodic floods, even after China has diverted a good quantity of this water by building dams up-river on its own territory. China has nothing like the Indus Water Treaty with any country!
The linking of rivers, and making ready of inland waterways by dredging them to suit, is another massive undertaking under the Transport Ministry that needs to be rapidly advanced with the resources to get it done.
The cleaning of the Ganga by undertaking thousands of sewage and effluent treatment projects along its long course is another huge magnet for investment.
We cannot afford to be worried about taking on massive debt to achieve all this, even as we are indebted to the tune of 70% of current GDP, or about $2 trillion presently.
We can afford to double this debt if we are going to hit $ 5 trillion in GDP by 2024. But instead of domestic debt, most of the new debt will have to be external.