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Home > Business > Columnists > Guest Column > Sanjeev Nayyar

How to achieve 10% GDP growth

March 16, 2006

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 (Rs 13-15 billion), 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.

The author is CEO, Surya Consulting.

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Number of User Comments: 6

Sub: Nonsense ...

This article is absolute nonsense.... I have not seen one good point from this whole article

Posted by Chaitanya

Sub: Stupid

The most stupid thing (besides many others) in the entire article is the mention about a separtate state for the Sindhi community. Why even mention? ...

Posted by Prashant Baldev

Sub: How to achieve 10% GDP growth

The author of the article has got funny ideas about economics and overall condition of the country. Special economic zone for education--Let any entrepre- neur ...

Posted by Samiran

Sub: 10% growth rate

Remember the ad-'Salah to sabhi dete hain'. There are two things without w we can't sustain a double digit rate. First, agriculture dependent on vagaries ...

Posted by JP Dubey

Sub: Interesting and very practical

Amazing.... To talk about growth is easy... but how to acheive is bit scientific...... I agree with you view.... they are very appericiable.. Cheers, Deepak ...

Posted by D Katkoria



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