Everyone in the world is talking about the India and China growth story. India is considered one of the hot emerging markets. But is this economic growth sustainable in the long run? I am not really sure. I say this because of the inherent contradictions that the country is struggling with, which makes this growth non-sustainable. To understand what I mean, we need to dig a little deeper instead of just scratching the surface.
Firstly, India is no-doubt one of the hottest markets for every one in the developed world who are used to low single-digit growth in their respective countries. India offers a great opportunity to all these entities to balance low growth in developed markets with phenomenal growth in the emerging markets like India. They are looking at India as a fast growing market. But, what will they do when this growth slows down is anybody's guess.
Secondly, the government's role in the growth so far has been minimal. It is true that the software & other services industries grew faster because of the tax incentives, but that was not the only reason for their growth. The government is planning to spend a lot of money on infrastructure, power and other areas which are essential for this growth to continue. But is the pace with which these are getting implemented enough to sustain the growth? the answer is no.
Thirdly, with the way the government is going about implementing its industrial policy, be it SEZs or steel plats or power plants, it is introducing a lot of hardship to the people who are getting affected. In the newspapers, we mostly read about who all made money when Tata set up their Nano plant in Gujarat. But what we don't get to know is the number of Singurs & Nandigrams which are waiting to happen. This will create more naxals and every state will wait for its turn to become another Bengal.
If we put things (that I have mentioned so far) in perspective, we can easily understand that the India growth story which we are all proud of, will probably not happen in such a grand scale after all. Because of the way things are being handled now, a big pause in growth is waiting to happen. The pain such a pause is going to cause is not very clear at this point.
Is there anything that we can do to prevent this from happening? Yes we can.
To start with, there should be some method to the madness of acquiring land for industrial purposes. We should have designated areas where industries are permitted. This will bring some order to the process of acquiring land. In addition, the government should let some independent third-party agency handle the compensation fixing & distribution process, which needs to done scientifically rather than the way it is being done now.
Secondly, we should stop welcoming investment in every sector just because someone is ready to invest big money. The government & the scientific community needs to focus on the long-term impact these industries will have on the environment as well as the people getting displaced. It is the improper rehabilitation plans which are the killers in most cases. We should figure out ways in which the displaced people can be made stakeholders in the development which happens because of their sacrifices.
Finally, the way the infrastructure is getting built leaves a lot to be desired. Everything is happening in a reactive manner, with no specific strategy being followed. We are making the same mistake of building too many roads as was done in US rather than build an efficient rail network across the country. But with Railways being run by government, this is not possible.
To conclude, unless we take remedial measures quickly, the economic growth that we are seeing in India may quickly come to a grinding halt in no time. The Indian population, which we are able to leverage now, will itself become the problem when such a thing happens.
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