India needs to manage its growth tsunami
Geetanjali Minhas | July 30, 2010
The country is set to double its economic growth in six years, making it past the two-trillion dollar mark, believes Ramdeo Agrawal, co-founder and director of Motilal Oswal Securities Pvt Ltd. He was speaking at a seminar – India: Towards a two trillion economy… but how to make the growth inclusive - organised by the Observer Research Foundation in Mumbai.
“The robust growth of Indian economy will be accompanied by challenges for the country . Unless handled well, it can widen the rich-poor gap in the country. India’s corporate sector and the government will have to change their mindsets, as this unstoppable reality will require a different line of thinking by everyone,” Agrawal said.
In 2001 India’s GDP was half a trillion dollars. In 2008, it rose to more than 1 trillion dollars. At present the GDP is 1.3-1.4 trillion dollars.
“In the next 5-6 years as income levels of population go up, India is waiting for a ‘tsunami’ of consumption . That is when it will produce double the goods and services. Many businesses will grow 5-6 times. The rise in income levels will yield three to four times increase in tax revenue for the government. The government has to proactively plan on how to spend this money effectively for wider social welfare like food, housing, healthcare and education. Goods and Services Taxes if implemented across economic sectors in an effective and efficient manner will have a huge effect,” he added.
Per capita global productivity is about 10,000 dollars. Global GDP stands at 60 trillion dollars with a population of 6 billion. i.e. 10,000 dollars per capita productivity. India with an average of 100 dollars per capita is 90% away from the world average. But in the next 5-10 years it will be on par with the world average. India will see an exponential demand for motorcycles, cars, housing and infrastructure .
Expressing his concerns about corruption in India’s potential tsunami of growth Sudheendra Kulkarni, Chairman ORF, emphasised the role of good governance and said, “ a sustainable economy that gives respect to nature and integrates with our knowledge is very essential. Most people in our country do not have access to toilets .If the poor don’t grow it affects others. If our governance does not support the tsunami of growth, it will be unmanageable.”
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