Dominic Barton, the
global managing director of McKinsey, gave an excellent
interview in December 2013, highlighting
India's problems. Among other things, he mentioned two that drew my
interest. One, India has the potential to grow at 10% or more. Two,
corruption is an issue that comes up for discussion more in respect
of Russia than India. For India, it is misgovernance that haunts the
nation. I could not agree more to both these views.
In Russia, corruption
is rampant, and disconcerting, because the country has massive
valuable natural resources. For instance, it is virtually the mafia
that runs the oil and gas businesses, leaving little for the
government. India, on the contrary, has a peculiar problem. We do not
produce enough crude and edible oil, necessitating huge expenditure
on imports of these commodities. We have one of the largest coal
reserves in the world, but still need to import it because Coal India
has no vision whatsoever. We do have excess cotton, but instead of
adding value and building a textile industry, we export the stuff.
Same goes for iron ore.
Now, let us consider
the textile business for a while. Few years back, Faisalabad, in
Pakistan, used to be a textile hub. Then came the bane of the
industry – power cuts. The industry started to die, and millions
were unemployed within months. Business shifted to more efficient
Bangladesh. Back home in India, Tirupur, a well-known textile
cluster, faced a similar story. Power shortages turned the business
unviable, small power loom owners faced extinction, and to add insult
to injury, strict norms on water treatment spelled doom for the
industry. India, however, was wiser and nimbler than Pakistan.
Industry shifted to Gujarat, a power surplus state that arranged for
a common water treatment facility for the cluster, saving on capital
expenditure for small and medium enterprises. That, I think, is what
India needs.
Indians are hardworking and entrepreneurs, what most just need is state support.
Lesser the regulations and barriers between state and business, the
better. E-governance, therefore, is what India needs. Ask a
businessman who used to waste one man-day in procuring a
straightforward sales tax form. Now, he downloads it from the
government website and focuses on better things. Corruption breeds
because layers separate the citizen from government records, creating
ranks and files of agents. Here is where the Japanese concept of
quality comes in – don't take post-facto action, stem corruption
before it arises. While an anti-corruption body is required, there is
little good in closing the stable door after the horse has bolted.
The other reason why
corruption can wait is because, let me put it honestly, we as a
country do not have enough money left to be embezzled. We are now
growing slower than developed Asian economies such as Malaysia, and
saving little for asset creation. India is now like an ageing man
whose income is reducing as he grows weak and has no assets to feed
him when he hits the hospital bed. Therefore, what we need is
sustainable GDP growth, and then ensure that the coffers, once
filled, are not looted again. Growing at 10% is extremely feasible,
as Mr Barton said, so let us gain the lost ground first. More than
150 million Indians will need jobs in the next ten years, we created
just 52 million over 2005-2012. As
a CRISIL report says, we need to revive our
manufacturing sector, or else 12 million people will have to shift to
low-end, farm employment for feeding themselves. Are we ready for the
challenge?
