Vedanta fully endorses the vision of prime minister Narendra Modi on utilisation of immense human capital clubbed with natural resources of India for creation of millions of employment opportunities in the country and making it a $5-trillion economy in the next few years. A recent Morgan Stanley report also stated that with government policies and massive disruptive workforce, India is well-placed to reach the $5-trillion mark by 2025.
The United States of the early- to mid-1900s has some striking parallels with the India of today. It was around this time that America began its journey towards becoming the world’s largest economy.
The biggest factors that propelled the growth and transformation of the US were technology, natural resources, manufacturing and private enterprise; a few men who dreamt big helped create the modern America. Andrew Carnegie, John Rockefeller, Cornelius Vanderbilt, JP Morgan and Henry Ford, with their entrepreneurial spirit and innovative approach, built businesses that helped make the transition to the modern industrial era. They laid the foundations of the American steel industry, oil and gas, natural resources and mining, manufacturing, finance and infrastructure building including roads, rail and ports.
America’s growth journey has some lessons for India. Both are large vibrant democracies with abundant natural resources. While America benefited from a large flow of immigrants in search of the American dream, India has a large population in the working-age group. More important, like the US, it has people with entrepreneurial spirit who can visualise a new India and unleash its potential.
Ours is a country with one of the largest reserves of natural resources in the world; the transformational potential of the resources sector is immense. Over $1-trillion is waiting to be explored in India.
An open and simple exploration policy for extraction of natural resources will make India an economic powerhouse that will have the potential to eradicate poverty. India’s current underutilisation of resources tells an almost unbelievable story. Despite having similar geology to North America, Latin America, Australia and South Africa, we produce only 20% of our natural resource requirements.
The mineral exploration industry in countries such as Canada spends over $2 billion per annum in green-field exploration, whereas India spends less than $50 million. The scope is immense since India imports almost 100% of its oil, gold, fertilisers and even electronics requirements.
What surprises is bauxite (a raw material used to make aluminium) mining in the country. In spite of rich reserves of over 3.5 billion tonnes, that can make India one of the top five aluminium producers in the world, the country is not able to mine bauxite for over the last 35 years.
India has failed to tap the large aluminium market, widely known as a green metal, and lost out to countries like China which fully imports the raw material. Even with 3.5 billion tonnes of bauxite—the third largest reserve in the world—India manages an annual production of less than 2 million tonnes of aluminium. In contrast, China that has no reserves of bauxite produces about 20 million tonnes of aluminium annually.
The story is similar in the case of iron ore. Given our reserve level, we are in a position to produce quantities matching Brazil’s and Australia’s, which produce in the range of 600 million tonnes per annum. Against this, we have so far been producing a modest quantity, of over 100 million tonnes annually;that also stands drastically reduced due to cap on production.
Transparency can prove to be a milestone in the history of job creation through utilisation of natural resources as this is a sector that has the potential to create employment not just in urban sector, but also in the rural parts of the country. This is a sector that needs young engineers, chartered accountants, management graduates, geologists, community service professionals, and also unskilled manpower that is sourced almost 100% from nearby villages.
What is needed is a simple policy that auctions natural resources in the most sustainable and transparent manner, on a revenue-sharing basis or for the highest royalty.
This will also encourage young start-ups that are keen to develop ancillary industries to utilise the metals using the best of global technology. The key to this simple revolution lies in a simpler regulatory framework, based on transparent policies and processes, emphasising self-declaration and strong deterrents and penalties for non-compliance.
We also need to simplify and unify our regulatory and approval process across the board by reducing at least 80% of our processes as well as clearance time. This can be done using technology, automation and simpler policies and rules.
A simplified regulatory and approval process could be a good enabler to get the best out of our bureaucracy.
As a suggestion, to strengthen the country’s economy, form a single large ministry to deal with development of all natural resources, bring oil & gas, mines, coal and steel under a single umbrella and under a strong visionary leader. This new ministry of natural resources would look into the optimum development of natural resources.
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These are some of the factors that also enabled America to emerge as an economic powerhouse. India can follow suit as long as all stakeholders have the will and commitment. The world is looking at India as the next destination after China. Some of the biggest advantages that India has are its vibrant democracy, a vigilant media and an excellent legal framework.
– By Anil Agarwal, Chairman, Vedanta Resources Plc