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Dear Reader,
Last Independence Day, the Prime Minister laid down a goal for the nation—to become a developed economy by the 100th anniversary of the country’s independence, in 2047.
We said at that time that India must seize the once-in-a-generation opportunity that had opened up. For decades, we had been told that we had missed the bus on manufacturing, that the Indian economy was in the throes of premature deindustrialisation, that we would always play second fiddle to China. Well, all that has changed. As we had pointed out on the eve of Independence Day last year, “India is well placed to capitalise on the political and economic shift away from China. Just as the US built up China as a counterweight to the Soviet Union, India may well play that role against China”.
In the last one year, the Indian economy has strengthened, we have succeeded in attracting the likes of Apple and Foxconn to our shores, Western disenchantment with China has grown, the PMI numbers show that Indian manufacturing has been one of the star performers globally, the Prime Minister’s visit to the US has signalled a new era in Indo-US ties, the stock market has been making new highs.
Neelkanth Mishra, Chief Economist at Axis Bank, told Moneycontrol Pro in this interview that India has a 30-year window to grow rich before she becomes old. To do that, he says, we have to increase capital accumulation by welcoming foreign capital, increase total factor productivity by becoming more efficient in our use of resources and improve our labour input by getting more women into the workforce.
A study by RBI researchers Harendra Behera, V Dhanya, Kunal Priyadarshi and Sapna Goel titled India @100 in last month’s RBI Bulletin says that, in order to become a high-income country by 2047 according to World Bank criteria, India’s per capita income must be USD 21664 in that year.
The RBI researchers emphasise that business as usual will not be enough to reach that target. They point out, “The task, however, may not be easy, given the current level of capital stocks, infrastructure and skill sets of the people. India needs to follow a multi-pronged approach for engaging the large pool of labour force productively and harnessing growth opportunities in knowledge-oriented sectors. While the unskilled/semiskilled labour force can be absorbed in MSMEs, new-age manufacturing and services sectors will require upskilling and preparing the younger generation to meet the future demand. While augmenting capital and empowering human resources could place India on the desired growth trajectory, technology will be a key player in this transformation.”
We wrote this week about the crying need to educate and upskill the workforce and the imperative for judicial reform. Add to that the vagaries of climate change, the disruption brought about by new technologies and military demands of the new geopolitics and it’s best not to underplay the challenges.
At the same time, there is little doubt that the government is trying to seize the opportunity to cash in on the China+1 opportunity. That is what is behind the decision to introduce import licensing for computers and laptops about which we wrote here and here. Much depends on how it is implemented, of course — the ham-handed manner in which the decision was taken is best avoided — but there is no question that the government is using import barriers as a tool to develop local manufacturing, in much the same way as some East Asian economies had done. Why, these days even the US has discovered the charms of industrial policy.
The way to look at the challenge is to ask: What should be the economy’s growth rate if we are to become a developed economy by 2047? The RBI study finds that we need to grow real GDP by 7.6 percent per annum. That target is eminently feasible, say the researchers, considering that countries such as South Korea and China grew at much faster rates for an extended period. All the industrial policy measures the government has been taking stem from trying to follow in their footsteps.
Also, India too had sporadic episodes of real GDP growth of more than 7.6 percent per year, the most notable period being every year from 2003-04 to 2007-08. True, that was a very different world, but perhaps India is seeing more globalisation now than then.
And it really doesn’t matter if we miss the target by a few years, as long as we aim high.
Happy Independence Day,
Cheers,
Manas Chakravarty
Here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity and forex markets:
Stocks
Weekly Tactical Pick, Coal India, IRCTC, PI Industries, Balrampur Chini Mills, Page Industries, Berger Paints, RateGain, Zee Entertainment, Bharat Forge, Home First Finance, Aarti Industries, TVS Supply Chain Solutions, Emami, IdeaForge Technology, CEAT, Aavas Financiers, Cummins India, Saregama, Hindalco, Max Healthcare, Delhivery, Royal Orchid Hotels, Power Grid, Aditya Birla Capital, Britannia, Mrs Bectors, M&M, SBI, Zomato, NTPC, Paradip Phosphate, Cholamandalam Investment, Laurus Labs, Devyani International
Markets
Equity markets are rising rapidly. These winning strategies can help you leave a mark
Investing in Markets: Make haste slowly and keep an eye on costs
Q1 earnings: hits, misses and outlook for equities
In the Money
Lenders have stretched balance sheets, mispricing of loans has begun: ASV Krishnan of HDFC Securities
A downgrade, resilient jobs, incoming higher inflation: How should market read them all?
Record dividends demonstrate Indian managements’ confidence
How do Sovereign Gold Bonds compare with Gold ETFs and Equity indices
Financial Times
How China cornered the market for clean tech
US investors face uncertain future in China
LEX: Lyft — fare cuts bring little cheer for Uber peer
Fusion: start-up shares are easier to create than limitless energy
Lex | CEO height: the long and the short of it
Private equity firms offer sweeteners to lure reluctant investors
Economy
The message from RBI’s surveys
What do India Inc’s rising cash flows signal?
Monsoon Watch
How long RBI pauses would depend on how strong growth is
Banking and finance
Is RBI’s CRR twist a one-time operational tool or a sign of more?
What could be the implications of RBI’s monetary policy on banks?
Is Q1 as good as it gets for Indian banks?
Every RBI governor has a pet interest rate theory
Industry and companies
Soft summer season hits healthcare service providers
Royal Enfield
Politics
No-trust Vote: Warm up exercise for the mega 2024 battle
Geopolitics
The Eastern Window: Pakistan wooing the US—Should India be worried?
Why global capital is souring on China
Personal Finance
The right asset allocation when interest rates are high
HDFC Bank eyes need-based product sales for new customers, post merger with HDFC
What NRIs must keep in mind when investing their money
When fund managers leave, should investors follow?
Startups
SoftBank sitting on $550 million of gains on listed Indian bets so far in 2023
How India’s DPDP Bill may impact cross border data transfer with EU companies
Others
Zuck and Musk show represents the trivialisation of business
Personal Data Bill—no snooping please
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