A $5 Trillion Economy? Pipe dream or possible? As India celebrates its 75th year of Independence, the air is full of optimism and hype over its future. Among the many “goals” set forth, the most mentioned target is that of the Indian Economy to become a $5 Trillion Economy. While India@75 can boast of many achievements in its name, there are “miles to go” (literally and figuratively) before it can reach the milestone of a $5 Trillion Economy. Indeed, India@75 is not lacking in potential as most observers point out that the Indian Economy is like a “lumbering Elephant” that just needs the “right” kind of nudge to gather speed and beat the “Tiger” Economies worldwide. I shall now explain how India@75 can become a $5 Trillion Economy by “unlocking” the hidden wealth in the 3Cs of Physical, Human, and Social Capital.
The Mystery of Capital and How India@75 Can Unlock Hidden Trillions
To start with, let us take the first C, Physical Capital. India@75 urgently needs to implement land reform laws, formalize land holdings, and regularize unauthorized constructions. As the famous economist, Hernando De Soto explains in his book, The Mystery of Capital, much of the developing world is poor because emerging nations are yet to tap the hidden wealth and unlock Trillions of value, as they lack records of formal ownership of land. Once this is done, such land can be used as collateral, put to productive use or, for that matter, engaged in farming, and what more, can be used to build factories and as part of “land banks”.
Indeed, one reason India@75 loses out in “translating” the promises of foreign investors into reality is that, more often than not, such investors cannot acquire land. Moreover, even the central and state governments are helpless, bound as they are by law, that need formal records of ownership. So, this is the physical capital that India@75 can tap into along with investments in the Informal Economy, which again is debilitated by lack of proper regulation and often is a cash-driven sector, that is inefficient at allocating capital. However, land reforms can help India@75 overcome the “jobs crisis” as these sectors are where “the jobs are”.
How We Can Replicate Our Diaspora’s Success Within India
Next, a $5 Trillion Economy is only realizable when the potential of its human resources is utilized to the hilt. For this, we need better schools, modern healthcare systems, and world-class institutions of higher learning to build a “human capital” that is competitive and capable. When Indians do so well abroad, what stops India@75 from replicating their successes within the nation? To overcome this, innovation and a culture of innovation are both necessary. We must eliminate our chalta hai attitude and cease applying the jugaad mindset in our lives and at work.
We have much to celebrate with our Unicorns and our much vaunted “services sector” on whose shoulders the Indian Economy rests. It is time to extend the “software” of human capital to all the other sectors to flourish and become a $5 Trillion Economy. Moreover, a $5 Trillion Economy is only possible when Indians are healthy and wealthy (each feeds into the other). The pandemic left much to be desired on this count, so the lessons learnt must be put to good use. In addition, we must address the “unemployability” problem that dogs the Indian labour pool and urgently take steps to understand the “low workforce participation rate” where more than half of all Indians of eligible age are not even looking for jobs.
Peace Is the Key To India@75 To Become a $5 Trillion Economy.
Perhaps the biggest and most timely market on the road to a $5 Trillion Economy is that there cannot be economic growth without societal peace and harmony. We need to understand this fast and follow the “advice” of noted economists such as Raghuram Rajan, who “batted” for liberal democracy as a sure way of India@75 becoming a global economic powerhouse. When genocidal and centrifugal forces threaten the social fabric, we must not let our atavistic tendencies get the better, lest we end up in anarchy. Moreover, India has often been described as the “land of million mutinies”, and it is up to us to unify and celebrate our diversity.
No nation has progressed without a strong work ethic and social cohesion. Indeed, apart from colonialism, one of the reasons why the Industrial Revolution happened in the West was due to the much celebrated “protestant work ethic”. While India@75 might have “missed” the bus to the manufacturing renaissance, it is not too late. A key ingredient in our recipe for a $5 Trillion Economy is to bet big on foreign capital-led and Atmanirbhar-driven industrial growth. Moreover, India@75 is now at a stage when the West is “targeting” China, and the Modi Sarkar can leverage this “opportunity” to wean away capital from the former. However, this can only happen when we “set our own house in order” by “loosening” the rigid constraints of our cultural mores. A $5 Trillion Economy would remain a pipe dream unless we unleash a social and cultural revolution.
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