It’s all about productivity. India scores poorly on indexes of economic variables that are critical for economic efficiency -- worse than Brazil, China and even Russia. To change that, it needs to do 10 things:
1. Improve its governance. This is probably the hardest and most important task -- the precondition for the rest. Modi is right: Whoever leads the next government in 2014, India needs maximum governance and minimum government. There is no point having the world’s largest democracy unless it leads to effective government.
2. Fix primary and secondary education. There has been some progress here, but a huge number of young people still get little or no schooling. I sit on the board of Teach for All, a global umbrella organization for groups that encourage the brightest graduates to spend at least two years teaching. Today India has about 350 teachers in these programs. It could do with 350,000 or more.
3. Improve colleges and universities. India has too few excellent institutions. Its share of places in the Shanghai ranking of the world’s top universities should be proportional to its share of global gross domestic product -- meaning 10 universities in the top 500 (it currently has just one). Make that an official goal.
4. Adopt an inflation target, and make it the center of a new macroeconomic policy framework.
5. Introduce a medium to long-term fiscal-policy framework, perhaps with ceilings as in the Maastricht Treaty -- a deficit of less than 3 percent of GDP and debt of less than 60 percent of GDP.
6. Increase trade with its neighbors. Indian exports to China could be close to $1 trillion by 2050, almost the size of its entire GDP in 2008. But India has little trade with Bangladesh and Pakistan. There’s no better way to promote peaceful relations than to expand trade -- and that means imports as well as exports.
7. Liberalize financial markets. India needs huge amounts of domestic and foreign capital to achieve its potential -- and a better-functioning capital market to allocate it wisely.
8. Innovate in farming. Gujarat isn’t a traditional agricultural producer, but it has improved productivity with initiatives like its “white revolution” in milk production. The whole nation, still greatly dependent on farming, needs enormous improvements.
9. Build more infrastructure.Adopt some of that Chinese drive to invest in infrastructure.
10. Protect the environment. India can’t achieve 8.5 percent growth for the next 30 to 40 years unless it takes steps to safeguard environmental quality and use energy and other resources more efficiently. Encouraging the private sector to invest in sustainable technologies can boost growth in its own right.
Courtesy:-Bloomberg.
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