India’s growth has slowed. Inflation is back, foreign direct investment has plummeted, and its currency is sinking. After two decades of impressive growth, optimism appears to have ebbed. In the minds of many, India’s shine has dimmed.
But today’s woes are a mere bump. Consider the long-term potential: the US has GDP per capita of $45,000 while India has one-thirtieth of that. No one expects the average Indian to get to US levels right away, but it is reason- able to expect that (s)he can aspire to, say, at least one-third of that- implying 10x income growth, to $15,000- by 2050. This would mean GDP addition of over $20 trillion annually, or the equivalent of one-and-a-half times the current US economy.
Achieving such growth requires three principles at its core: it must be purposeful, democratic, and sustain- able. Why purposeful? Purpose generates excitement, is unifying and makes growth transformational. In a country with deep socioeconomic, urban-rural and cultural divides, a sense of purpose is a necessary condition for its many factions to align behind deep change.An example of a purposeful idea is the Ganga-Cauvery river link, one suggested four decades ago. Consider its potential implications for agriculture, drinking water, sanitation and transportation, while simultaneously mitigating flooding problems in the North and drought in the South. Moreover, it will generate millions of jobs and thriving communities along the waterways, while creating upstream and down- stream business opportunities.
There will be legitimate objections – notably around environmental consequences for river deltas to overcome. But, in the decades since the idea was proposed, India has surely developed the scientific, technological, and governance capabilities to address them.
Why democratic? Ensuring buy-in for such growth requires people to believe that the resulting wealth creation will be inclusive. While the past two decades have created a great deal of wealth, it has also concentrated that wealth. For example, the net worth of just the 50 richest Indians now amounts to one quarter of GDP.
Much of India’s recent growth came from taking advantage of globalization of markets, know how and resources. But India primarily adopted a ‘gate- keeper’ strategy: foreign companies were welcome if a well-heeled Indian partner could be found. This is an undesirable approach as it allows the already overly affluent gatekeepers to skim the wealth created from the 10x growth.
India needs the best in capabilities that the global economy possesses in order to grow. But getting those requires a mindset change. India must not only refashion policy towards multi- nationals in an inviting manner, but also in a way that allows its middle class to participate. India should consider, for example, requiring multinationals to raise at least 49% of the equity capital directly from the public. Such a simple strategy not only obviates a need for gatekeepers, but also democratises future wealth creation.
Why sustainable? Business-as- usual in natural resource use is a non-starter. Take the example of CO2 emissions. While the world produces every $1,000 of GDP by emitting three-quarters of a ton of CO2, India needs 1.5 tons. This inefficient fossil fuel utilization mirrors that in the use of other natural resources such as air, water, minerals and metals.
India dismisses such concerns by asserting its people are frugal: after all, the average Indian emits one-twentieth the CO2 of the average American. India also points to the inherent unfairness in the West having become rich by having a ‘carbon party’ that made possible cheap wealth creation. But such assertions miss the point. Given the scale of India’s growth needs, resource use at current levels of inefficiency- with attendant emissions, waste, and pollution- will degrade the planet’s natural environment on an unimaginable scale. Push back is inevitable.
Instead of viewing sustainability as an imposed burden, India should see it as an innovation opportunity. Here is an idea. Why not produce nuclear energy from thorium, found abundantly in India? Research into thorium – including by Indian scientists – goes back decades. It could be a source of inexpensive energy, be easily scaled, presents no meltdown risk, uses existing nuclear waste, degrades to safe radioactive levels in hundreds (rather than tens of thousands) of years, and obviates weaponization possibilities. Can India fast -track and install, say, two or three demonstration projects to learn from them a workable business model that can be rapidly scaled?
The larger point here is that India’s growth aspirations cannot be put back in the bottle. The examples offered here are just that. Why not take it a step further: let’s design a contest called “10 Big Ideas for 10x Growth.” The only requirement for submissions should be for proponents to justify how their idea fosters national purpose, promotes democratic wealth creation and sustains the environment.
We recognize that enabling such growth will require investments in education, rural development, and improved governance. The starting point, however, has to be bold leader- ship – one driven by a sense of legacy. India’s current leader was a key architect in paving the liberalization path two decades ago. To bookend his career, he must revitalize the country’s sense of optimism, by proposing a growth platform based on our three core principles.
Now, that could leave a lasting legacy. Vijay Govindarajan, ranked #3 in the 2011 Thinkers 50 list of greatest management thinkers in the world, and Anant Sundaram are professors at the Tuck School of Business at Dartmouth College, USA
WAY FORWARD For India to achieve a higher rate of growth in the coming decades, it’s important for its people to believe that future wealth creation will be inc.
– VIJAY GOVINDARAJAN & ANANT SUNDARAM