The discontents of globalization are manifesting themselves the world over in democratic processes. It is increasingly clear that while the root cause of unemployment and stagnant incomes in the developed world may be due to the after-impact of the global economic crisis and slow recovery, the perspective of those affected relates their travails to global trade and globalization as a whole.
India’s domestic development imperatives, too, are increasingly urgent. The country enjoys a vibrant democracy, strong democratic institutions and economic fundamentals, and an aspirational society, coupled with a growing workforce that is the youngest in the world. These present an unprecedented opportunity for India to surge ahead in global leadership.
But for this, India needs to address various parameters. Growth requires a secure and stable environment, a facilitative investment climate, and favorable social ideas. Governance in a transparent and efficient manner, both from democratic institutions and the corporate sector, must meet the needs and aspirations of the citizens at large. The inclusiveness of the growth process, with the creation of more and high-quality jobs, better livelihood opportunities, and better access to quality education and healthcare, must be ensured.
India has emerged as the fastest-growing major economy in the world. As per advance estimates for 2016-17, GDP growth was 7.1%, despite the uncertainties in the global market. This is accompanied by improving macroeconomic indicators such as fiscal deficit, current account deficit, and inflation. FDI inflows are robust, and foreign exchange reserves are expanding.
India has several forces in its favor which will drive its productivity and thereby growth in the coming years. Over the next quarter century or so, India will have more people entering the workforce than any other country has ever experienced in history. The second force is urbanization, a process which would see close to 600 million residents in cities by 2031.
The third is the increasing levels of education and skill development arising from access to learning. More people will enter college in India during the coming decade than any other country has seen in any decade till now.
The fourth driving force is rising technology adoption, especially among India’s micro, small and medium sector or MSME.
Finally, even while there appears to be a pull-back from globalization, India’s low presence in global markets and competitive wage structure presages greater global integration in coming years.
India has embarked on a comprehensive reform process that aims at strengthening market operations and enabling the private sector to grow rapidly. There is new entrepreneurial energy in the country, which is now home to the third largest number of start-ups in the world.
The Indian States are emerging as the next theater of reforms and growth. There is strong emphasis on developing industrial parks in alignment with local resource capacities, along with efforts for skill development, investment facilitation, and international integration.
Challenges to Growth
While the GDP growth rate remains encouraging, the Indian economy is suffering from declining investment, slow industrial growth, overcapacity and rising bank Non-Performing Assets (NPAs).
Bank NPAs at 9.3%, with public sector banks at 11%, is a matter of high concern. NPAs are close to `7 lakh crores, growing by 2.5 times in two years. Banks have also become cautious about lending and asset restructuring.
ease of doing Business: Tremendous progress has been taking place across a range of areas including registration of companies, filing of labor returns, trade facilitation and single window time-bound clearance systems. However, translation at the ground level requires a lot more attention.
Revival of Consumer demand:
Despite lower inflation, the 7th Pay Commission, and good monsoons, demand has not increased as fast as expected, and industry capacity utilization remains subdued.
Resurgence of Global demand:
The recent export surge notwithstanding, global demand may remain a challenge. India also needs to boost its share in global trade. There is a need to drive up export diversification in terms of products and markets.
Going forward, some areas that need action include:
- Smooth and efficient implementation of GST
- Lowering of corporate income tax for the remaining 4-5% of large companies
- Innovative new means to resolve bank NPAs
- Continued emphasis on ease of doing business, including trade facilitation
- Continued opening up to FDI, including large and small companies
- Development of industrial corridors connecting cities
- Rapid progress on infrastructure, especially through actioning public private partnerships in a new model.
Leading the World
India enjoys a rich diversity of talent and capacity as well as a deep pool of intellectual and creative thought. Its State Governments are devising innovative models to grapple with their challenges, and are the drivers of growth and development for the country. With proactive entrepreneurs capable of taking risks and a reform-oriented Government, the country is eminently suited to emerging as a chief pilot in the new phase of globalization.
Consider these facts. India is
- a young nation. In 2025, it will have an average age of 29 years, a 99% literacy rate and a middle class growing by 150 million consumers.
- the world’s third-largest start-up hub with almost 700 new tech companies coming up every year.
- the fastest-growing aviation market in the world with 100 million passengers in 2016, a growth of 23% over the previous year.
- the largest provider of generic drugs in the world, and is expected to be the second largest steel producer and third largest automobile maker in a few years.
- the world-topper in milk and millets, coming in second for fruits and vegetables production.
- the world’s largest exporter of engineering R&D with 40% share of the global total, with well over 1000 global R&D centers. It is ranked third in the number of biotech companies in Asia.
- set to be ranked third among solar power-producing nations this year.
A country the size of India cannot but be a part of the leadership profile of the world. Its inclusion in the G20 and other global platforms recognizes its significant role. However, the nation must devise its own path to leadership and develop cohesive strategies, including the spirit of cooperative federalism, to emerge as a real global player.
Industry has a pivotal role in nation-building. In today’s volatile world, the future of Indian industry, in essence, rests on four key pillars which companies must internalize to build larger national and international salience. They are:
Companies must go beyond regulatory norms and legal compliances to build strong ethical practices, including governance and leadership, objective and consistent management practices, sustainability and environmental considerations, and managing impact on employees, investors, customers and shareholders.
The CII Code of Conduct for Ethical Governance has outlined a set of practices for Indian industry to voluntarily internalize to emerge as a global and ethical leader.
Indian industry must address global markets, accept competition in its own markets, and undertake strong action for overseas investments. India needs a thousand multinationals, operating around the world, in every sector, building brands and reach, and deploying their technical capability worldwide.
Indian industry’s engagement in R&D is just 0.3% of GDP, representing one-third of the country’s total R&D spend to GDP ratio. Indian industry must scale up its engagement in R&D, innovation and design, leveraging its home-grown researchers and engineers.
Good Corporate Citizenship:
Indian industry in general has remained engaged with surrounding communities and has worked on education, health, environment, and other issues. This is a strong foundation for taking corporate citizenship to the next level of global leadership.
Source: CII Communique May 2017