Saturday, May 23, 2015

Make it easy to do business in India.

Make it easy to do business in India.

Poor world was dying due to hunger 5 decades ago, now rising as middle class people (350M in 2030 and 700M in 2050) moving from rural to cities. Urbans generate 80% of global GDP, use 75% of resources and emit 2/3 of the green house gases. It has posed a big economic challenge in front of many developing countries to create jobs for the youth or to face social revolutions.

Look at the macro picture of India.

1. India ranked 134/189 (now slipped to 142) for ease of doing business.

2. India's current account deficit is due to oil imports. But mostly people and businesses are dependent on road transport. Developed countries used Rail and water ways more. Rail to Road ratio is suppose to be 80:20, but in India it is 20:80.

3. The country has food stock of 60 MT but food inflation is 23%.

4. High Protein Inflation but high export of Soya.

5. It is water scarce country but exporting rice (1kg of rice consume 3000 ltr of water).

6. Skilled workforce earn high wages at high end but masses of workforce are poor skilled, earning less.

7. Wage gap and productivity gap are big between formal and informal sectors.

8. 40% of the demographic dividend is stunting. 50% demographic dividend cut as women are not fully participating in GDP generation as workforce.

9. Value chain participation lowest among 25 developing countries.

10. Logistics in India is a major problem. Cost of logistics is inefficiency.

11. 650 border posts across the States, trading India & India.

12. India is a urbanised country, where large, medium, small and intermediate urban areas are growing rapidly.

13. MSME generates 50% of GDP and 50% of employment but get only 2.3% of bank finance.

14. Private sector has ability to raise resources for infrastructures.  It has ability to bring in project managers to implement projects in time limit and without cost over run. 

15. Economic development is supported by Bureaucrats but created by entrepreneurs. They created jobs in the area where nothing was there 10 Y ago.

16. FDI expects predictability and consistency in policies, tax structures and no retrospective ammendments appreciated. 

17. Global walls are disappearing. National or International brand will survive as per customer satisfaction.

18. World has slower down in growth. Exports growth is going down. The developed countries about to face recession may search for investment opportunities where growth and rate of return are high.

19. Jobs in apparel, toy making etc are moving out of China and if India is not ready, Vietnam, Bangladesh, Myanmar etc will take away these jobs.

PM has targeted to reach to no. 50.

How will it be possible? Can we achieve it?

There are 3 critical issues to be addressed:

1. Challenge of Urbanisation.

2. Challenge of increasing share of manufacturing in GDP from 15% at present to 35%.

3. Challenge of Infrastructure building.

India and China were same in terms of growth till 1975. But China took a U turn, moved from peasantry based policies to manufacturing. Youth moved to cities from villages. 10% Growth rate boomed the economy growth to 16 fold. India started late in 1991.

Who created hurdles to do business in India? IAS officers (bureaucrats)? Politicians? Or corrupt practices of both to earn easy money to grow and win elections respectively? A debatable issue.

Let us focus on the following. These are doable.

1. IAS officers can be agent of change. They can dismantle procedure, papers and red tap, to make it simple and easy to do business. Trust between Public and Private sectors to be developed.  All decisions must centred around 12-13% growth.

2. Learn from local and global success stories and transplant them.

3. "India learning from India". There are good practices. Why Noida, Gudgaon, etc, not replicated?  States shall compete with each other.

4. Support the growth of young firms. Job created in last 10 years by them were not existed before.  Resolve problem of availability of credit to young firms and MSME sector.

5. Create opportunity for informal sector firms move in formal so that productivity and income of workers go up. Labour reforms like Rajasthan to be implemented by all States making exit of labourer easy.

6. Centre around Goal. Be a facilitator.

7. Better implement less inspections. Free manufacturing sector from inspector raj. Choose 'Policing' instead of 'Police Raj'. Audit is more effective than inspection.

8. Create conditions for jobs without worrying about from where the jobs coming from.

9. Compete to make goods for India to consume within country. Focus on domestic market.

10. Need a vibrant civil society like China, Japan , S. Korea.

11. From foreign investors perspective rupee value, inflation, uncertainty matters. Build capital sustainable market with clarity of contract terms and not retrospect tax structures.

12. To increase Agriculture sector share in GDP, address issues of 2nd green revolution.

13. Manufacturer sector to be further encouraged to grow exports by 28-30%/annum. Modify labour laws to make labourer exit easy and get new workforce to maintain viability of the project.

14. Develop good quality infrastructure. There is poverty in India in preparing good quality direst projects development. $1T investments to generate to build infrastructure in next 4-5 years.

15. Make it easy, easy to do business. Listen stakeholders, rationalise and understand larger goods of society.

16. Provide a Safety Net, to make entry and exit easy. 

17. Society to stress more on value education.

18. Need vibrant private enterprises to create jobs. 

19. Need for mother and child care from the day of conceive to improve quality of human resource. Need a global competitive workforce, therefore, all youth must complete study up to secondary education. Join women in workforce.

20. Build new but use better the infrastructure created.

21. Dismantle border posts and allow GST.

Let us be "Indian Agreement Service" on the "India Growth Agenda" for the better quality of life of the people of India.



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