As part of the Citi-MIT Sloan convention held recently, a panel discussion moderated by Naazneen Karmali, India-editor, Forbes Asia and comprising Adi Godrej, chairman, Godrej Group, Vineet Nayar, VC and joint MD, HCL Technologies and SP Kothari, deputy dean, MIT-Sloan School of Management, concur that the need to boost economic growth has attained centrestage for electorates across the country in the last year before the general elections in 2014.
The panel also highlights, on CNBC-TV18, that politicians are slowly becoming aware of the issues of growth and development and the electorates' desire to fulfill their economic aspirations.
Below is an edited transcript of the show on CNBC-TV18
Karmali: Let's start by discussing growth. What do you think is the right level of growth? Today at 5 percent, could India be the envy of most economies worldwide?
Godrej: To my mind, the growth rate of 5 percent is very clearly the end of the world for India and the right level of growth should be double at 10 percent, which in my opinion, is achievable with the right policies and framework. Clearly, the economy is not moving in the right direction at such low levels of growth.
In 2008-2009, when the global economy faced the financial crisis, India’s economic growth came down from an over-9 percent level for the previous five years to about 6.4 percent. But the government acted by providing fiscal and monetary stimulus and in the next two years, the economy grew at 8.4 percent when growth worldwide was still struggling. Since then, unfortunately the economy hasn’t moved in the direction it should have which over the last couple of years has led to very low rates of growth.
However, the government has woken up to the problem and has taken several steps over the last four or five months, which to my mind, are very positive. I do hope that the momentum continues.
Nayyar: I fully agree with Adi Godrej on the fact that the growth is unacceptably low predominantly because the low per capita income has widened the headroom for growth by such large proportions that even a 10-percent growth is not something great to write home about.
Trying to achieve the growth rate of 10 percent over the next 15 years is necessary to hold aspirations intact because that is what growth is all about. Another fact that needs to be collectively contemplated is that as a democracy, the people deserve the government that it elects. The government that has been elected today is one that does not have a clear mandate and all its attempts to drive a clear mandate have been derailed due to electoral politics.
However, the silver lining is that the rate of GDP (gross domestic product) growth has begun to appear on the front page of every Tamil, Hindi, Telugu and Bengali newspaper today. This indicates that for every single electorate the discussions on the GDP growth rate, economic parameters, corruption and the lack of infrastructure have attained centrestage.
This trend will have two ramifications. One, every single political party will have to articulate a policy to boost growth, ensure security, affordable education and reduced corruption. This would automatically build a certain amount of consensus for 2014 going forward. Two, the electorate will deliver a decisive mandate not just for any party, but for growth.
Therefore, the government in 2014 will be able to take some of the tough decisions to boost growth that it is unable to today. In a longer term perspective, the crisis in the economy just before the elections maybe just what the doctor ordered.
Karmali: Do you think this is what India needs?
Kothari: Though the growth rate of 5 percent is unacceptably low, it is sometimes helpful to gauge the on the-ground effect that it translated into. The 5-percent growth, in terms of per capita, has to be adjusted for population growth. An individual benefits 5 percent minus the population growth which is 1.3 percent. So, the actual growth is about 3.5 percent. And at this rate, it would take 20 years to double one’s income.
India’s per capita is currently about USD 1,500 and it will take forty years to increase it to USD 5, 000. To put things in perspective, currently the per capita in the US is about USD 40,000. So the current rate of growth is unacceptably low and the only hurdles preventing the growth rate to touch 10 or 12 percent is a lack of leadership and bold ideas. So this election is crucial and might be key in increasing the competition among members to be chosen as the leaders of their respective parties.