Washington: Expressing serious concern over substantial drop in investment in the country in the last decade, India’s Chief Economic Advisor Krishnamurthy Subramanian has said investment is key to the country becoming a $5-trillion economy in five years.
Subramanian told a Chicago audience last week that he has identified three engines to promote investment; land reform (land acquisition laws need reform), labour reform (ease labour laws to encourage employment), and power (price it better to provide access to encourage a more balanced growth across the country).
During a conversation organized by Indian School of Business (ISB) Office of Alumni Engagement, in partnership with Kellogg Public Private Initiative, Subramanian was responding to a question, “How is India going to grow to $5 trillion In five years?” The answer, he said, is largely by encouraging investment in the country. “Investment as a per cent of GDP was 40 per cent in 2008 and this has come down to 29 per cent in 2018. This is worrying statistic for a growing economy,” Subramanian said, according to a press release.
He said the country needs to start differentiating between pro-market and pro-business economies. “We can do this effectively by allowing the market to determine which companies survive with minimal government interference in the form of bailouts,” he said. He said that a good policy is characterized by averages and aggregates and bad policy is characterized by anecdotes.
When asked about the nationalistic agenda in terms of protecting local businesses, he was strongly of the belief that globalisation would be key to improving the productivity and performance of these businesses. “It had been 30 years since liberalization, we need the businesses today to behave like independent 30-year-old adults,” he said emphatically. The ongoing trade wars could significantly impact India’s position in the global trade ecosystem, he said. “The country currently only holds two percent of the global trade market share and we as a country need to leverage these opportunities to grow this number, by making the companies more productive, reduce trade restrictions, and identifying gaps in the trade value chain that we can capitalize on,” Subramanian said.
Manufacturing incentivized by policies such as “Make in India” and agriculture by ensuring access to market for farmers are key sectors that are going to drive a significant portion of India’s growth over the next few years, he said. “Krishnamurthy Subramanian’s insights gave great clarity and confidence that the government is very keen on addressing the needs of the Digital and Startup economy,” said founder and CEO of Biz of IT Innovations, Bala Palamadai, one of the attendees had this to say of the event.