Without reforms, Indias growth script lacks global appeal

Written by Sushim Banerjee | Updated: Jan 22 2013, 07:28am hrs
The latest forecast by the IMF has put Indias GDP to grow by 4.9% in 2012 and 6% in 2013 against a global growth of 3.3% and 3.6%. Based on the economy's behaviour in Q1 and Q2 of FY13 at 5.5 and 5.3%, it seems the Indian economy would grow at around 5.5-6.0% for the full year of 2012-13 and is likely to grow at 6.5-7% in 2013-14.

Thus current economic growth in the country amid worldwide slowdown is only next to China and much above the growth paradigms seen by other members of the BRIC club.

Despite this, Indias growth story does not find much of a place in the deliberations and reports on the global perspective.

The latest example is Platts report on outlook of steel industry where none of the experts have mentioned about the prospect of the steel industry in India, which has been projected to grow at one of the highest rates in 2013.

One plausible explanation could be the low share of the Indian economy in terms of global wealth, share in specific commodities, including agriculture (except milk), and the marginal performance in trade.

India stands high in population numbers and as large importers of crude oil, gold and coking coal.

A trend is also visible that some specific areas of the economy are providing space for utilisation of the excess capacities of advanced countries.

This has hit hard a few critical sectors such as machinery and equipment, all belonging to the manufacturing sector, which has grown by a meagre 1% during April-November 2012.

A second reason relates to the lack of trust by many analysts in the ability of the Indian economy to sustain the growth perspective in the coming years.

The hesitancy in introducing the much-needed reforms, the inter-ministerial conflicts in resolving issues and the compulsions of coalition polity may have brought in some amount of doubts in Indias progress chart.

A recent analysis on the world in 2050 by PwC has, however, nullified these apprehensions.

Indias GDP at Purchasing Power Parity (PPP), which is a better indicator of average living standards or volumes of outputs or inputs has been estimated to go up from the current rank of 4 to the 2nd position, even above the US in the next 38 years.

The countrys GDP measured at Market Exchange Rates, which is a better measure of the relative size of the economies from a business perspective, has been projected to go up from the current 11 to the 3rd rank in 2050, next to the US.

The average annual growth of GDP per capita for India now and in 2050 has been projected at 5.3%, next only to Vietnam.

These bright long-term forecasts for India are to be transformed into reality with a prudent mix of economic reforms and their implementation in right earnest.

The author is DG, Institute of Steel Growth and Development. The views expressed are personal