The path to 10% growth, my arti in Business Standard

[Guest guest]

Sanjeev Nayyar: The path to 10 per cent

Sanjeev Nayyar / New Delhi March 16, 2006

http://www.business-standard.com/common/storypage.php?storyflag=y&leftnm=lmnu5&leftindx=5&lselect=2&chklogin=N&autono=218743

To achieve a 10 per cent growth, India needs to think out-of-the-box.

 

A GDP growth rate of 8 per cent has led to euphoria all around. The question,

however, is, can we sustain it? More importantly, India must think big and

target to consistently grow at 10 per cent. Will the existing policies deliver?

India needs to think out-of-the-box, realise that strategy and implementation

are equally important and change its mindset.

 

What must be done? Focus on urban or rural markets, globalise or be inward

looking, build rockets or provide free power, run a national employment scheme

or support entrepreneurs, are some of the conflicting approaches that need to

be resolved. Our policies should reflect a combination of approaches to create

wealth across all sections of society. Some innovative ideas:

 

Special economic zones for education (SEZE): India sent about 76,000 students to

the US in 2002-03. If each parent remitted an average of Rs 15 lakh a year,

India’s contribution to the US economy was about $2.6 billion. Most

students go abroad because the demand for quality education exceeds supply.

Further, seat availability is reduced by reservations. Conversely, college

managements complain they are not allowed to fix fees that reflect actual costs

and are subject to excessive government control.

 

These centres of excellence would be governed by the Central government and

administered by a regulator. There would be no restrictions on fees/ salary for

the faculty or tie-ups/equity investment by foreign universities. Admission

would be on merit only.

 

These SEZE’s should be able to not only retain at least 40 per cent of the

students in India but attract foreign students, too. At 2002-03 levels, it

implies a fall in remittances of about $1 billion.

 

Empowering rural India: The Gujarat government has introduced a unique scheme

called Jyotir Gram Yojna. Due to inadequate power generation and excessive

consumption by the agricultural sector, load shedding was unavoidable. With an

investment of Rs 1,300-1,500 crore, the government decided to provide

single/three-phase electricity connections to domestic and cottage industry

consumers in all villages with a population more than 3,000. This way, line one

is for agricultural and line two for domestic use. Homes are assured power for

about 20 hours a day and the farmer gets a minimum of eight hours. So far,

about 14,000 villages have been covered.

 

Near-uninterrupted power at home has given an impetus to diamond polishing and

cottage industries. At a cost of between Rs 6,000-10,000, villagers have

started Ghanti — a diamond-polishing unit. Average monthly income is

between Rs 3,000- Rs 4,500. Earlier, villagers went to cities for work but

reverse migration has started now. Home industry allows homemakers to work in

their spare time, which results in empowerment of women. Deurbanisation reduces

the need for men to go to sex workers, which decreases the possibility HIV/AIDS.

 

 

Health care cities: According to a McKinsey Quarterly article, “Employee

benefits now represent the third-largest expense after the cost of goods sold

and non-manufacturing payroll and health insurance is the fastest growing

component. Total US health insurance cost in 2003 was $389 billion”.

 

India could help reduce costs by setting up health care cities. These will have

hospitals and hotels. Facilities would be world-class but at a lower price.

Hospitals could be funded by private equity funds, hospitals and have

back-to-back tie-ups with Western insurance companies. Hospitals must be run on

corporate lines and pay income tax at 20 per cent (no exemptions).

 

Rural malls: Traditional thinkers are happy to see Indians work globally.

However, if India seeks to grow at 10 per cent, it must seek to capture a

higher per cent of value addition within the country itself.

 

Rural India needs huge malls that are a one-stop shop for farmers needs? They must have a:

 

Technical cell that advises farmers on crop related issues; Bank that provides

credit; Insurance company that insures produce; Mandi that buys produce at

market-related prices; Food-processing unit; Hospital that provides basic

medical facilities for human beings and cattle; Consumer store; Entertainment

complex that organises melas, bullock cart races and rewards outstanding

performance by farmers.

 

The malls must be promoted by the private sector.

 

Indus economic free trade zone (IEFTZ): After 1947, the Sindhi community is hurt

because unlike others, they do not have a state to call their own. We also know

that the Sindhi community is successful globally. Is there a way by which India

could satisfy their need for a state and attract capital?

 

We could start the IEFTZ in Kutch. Why Kutch? Three reasons. One, Indus area and

the Kutch are geographically close to each other. Two, there is similarity

between Sindhi and Kutchi languages. Three, Kutch needs lots of investment,

which NRI Sindhis can provide. There was once a proposal to create a state of

Sindh in Kutch.

 

Carving out a separate state of Gujarat is a non-starter. Instead, IEFTZ could

have a clearly demarcated area. Broad contours of the scheme are: All Indians

could invest here but preference would be given to the Sindhi community. They

would be allowed special facilities for preservation of Sindhi culture. The

IEFTZ could be a joint venture between the government and the Sindhi community.

 

 

If the average Sindhi believes there is money to be made coupled with making a

contribution to preservation of Sindhi culture, I am sure the IEFTZ idea would

fly.

 

India needs many more ideas to achieve its potential.

EOM.

 

 

 

Sanjeev Nayyar

Previous Columns

Sanjeev Nayyar: Don`t regulate broadcasters

Sanjeev Nayyar: When `revenues` pinch the purse

Sanjeev Nayyar: A sorry state of affairs

Sports channels: New rules for the game

Uplinking for transparency

Satellite TV should beam in on the manufacturing model