27 December,2010 07:20 AM IST | | Rakesh K Dhawan
As we get set to enter 2011, the sentiment about India is decidedly bullish, never mind the scams that continue to put a question mark over our system
Even though the year 2010 has earned the none too flattering epithet of the year of scams, the overriding sentiment about India is decidedly bullish. India achieved $1 trillion in GDP in 2007.
India stands at number 11 in terms of GDP in the world right behind Canada. India's growth rate is estimated at a whopping eight percent plus for 2010-11.
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Salaries are on the rise, foreign direct investment is increasing, and land prices are skyrocketing.u00a0 The party has just begun.
Six key elements
We should be able to ride the wave of eight percent plus growth all the way to number one by the year 2053. That is not going to be easy.
US supremacy in the world is unchallenged and it will remain so for a long time. There are six key elements, which determine the fate of a nation in terms of riches.
Those elements in no particular order are: 1. Innovation 2. Demographics 3. Access to Opportunity 4. Infrastructure 5. Immigration and 6. Government.
US economy is suffering
Today the US economy is suffering because it does not have one of the six elements -- demographics. US has aging demographics, which cannot be changed.
On the other hand, India may have only one element in her favour - demographics. India does not have the remaining elements in her favour. Those elements though can be changed.
Innovation: Small Business Innovation remains a critical and significant defining element in deciding a nation's wealth. US, Japan and Germany have an exceptional record of innovation.
So far, India's record of innovation is dismal and non-existent.
Most Indian businesses know trading and the remaining are more focused on providing low cost brainpower to the West.
We have several multi-national companies with extensive research and development facilities in India.
However, those innovations do not belong to India and they cannot create extraordinary job growth as has been the case in the US with several small business technological innovations for the last century.
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US has also shown leadership in establishing programs such as Small Business Innovation Research (SBIR). SBIR program funds 5000 small business projects with $2 billion annually.
These projects are of extraordinary intellectual value having passed the muster of tough review process. We must hasten the pace of innovation.
Demographics: India is a young nation with a median age of 24 years. US has a median age of 37 years and China has a median age of 35 years.u00a0
The consumption pattern for humans peak in their early forties. That implies that the US and Chinese economies will run out of steam in the next few years, whereas India will keep humming along for many years to come.
Access to Opportunity: Most people have heard about the, 'American Dream'. The American dream is about having a well paying job or business, a house in the suburbs, a wonderful family and all the 'necessary' material goods.
That American dream has been a powerful engine of hope and energy for the US economy. This hope has emerged from the belief of each and every American that if he/she works hard enough, he/she will achieve his/her objectives without a problem.
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That is access to opportunity, which India does not have as yet. A handful of Indians have access to significant amount of opportunities. Indians not living in Metros have little or no access to opportunities.u00a0 This must change quickly.
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We must remember it is the per capita GDP which is important. Currently, US is at $46,400 and India is at $3,100, which is about seven percent of US per capita GDP.
Infrastructure: The Indian government has made big announcements recently with plans to invest billions of dollars in building infrastructure.
That is an important signal to the rest of the world about India's intentions to become a prominent player in the world economy. Complicated government regulations stifle innovation and manufacturing activity.
Large businesses flaunt government regulations by buying government officials. That does not create a level playing field for the Indian citizens. Unless the common populace has a level playing field, Indians will have hard time catching up with the West. But that can change quite rapidly.
Immigration: The US is a country of immigrants. That has infused great ideas and helped invent great technologies.
Healthy immigration is vital for economic growth. With an extraordinary medieval history of foreign rulers, Indians are not apprehensive of immigration.
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That acceptance of foreign cultures and ideas makes India a strong society. However, Indians need to be particularly accepting and welcoming of different cultures and ideas.
Government: The US has enjoyed an astonishing governing body. There is no other governing body, which runs as well as the US government does.
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It is no mean task to manage an economy of $14.2 trillion.u00a0 India has done well to unshackle her citizens with a wave of liberalisation which started in 1990s.
What is sad and somber is the fact that China and India had the same GDP of about $320 billion in 1990 and today China is $8.8 trillion (as per recent CIA estimates) about seven times the size of India.
We need young, honest and brave Indians who can eliminate the remaining irritants from the system.u00a0 It took Indians 400 years and a Mahatma to throw the British out.
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It does not need another 400 years to end the corruption raj. We can do it in five.
The writer is an IIT Kharagpur graduate in Electrical Engineering, who divides his time between Pune and the US. He held a workshop titled, Unleashing Innovation recently.
