With faulty policies and incompetent policy makers, the Indian economy has seen its worst. IIPM Think Tank suggests ten critical policy measures that can save the Indian economy from mirroring the paralysed socioeconomic conditions of US and Europe
When the northern, eastern and north eastern power grids in India collapsed in July and left more than half the country in the dark, it was declared to be another vivid indicator of India’s incredible growth story having run its course (following S&P’s downgrade, which predicted that India would be the first fallen angel among the BRICs). What the world chooses to ignore is that structural flaws in our power sector in generation and T&D have been holding back our economy for years, including the years where they felt so overtly optimistic (and even insecure) about India’s potential on the world stage. For the record, India achieved a net capacity addition of around 4 GW per year from 1997-2007. But a McKinsey report (however much you might wish to believe it) indicates that a growing India’s needs from 2007-2017 merit a net capacity addition of 20-40 GW per year, i.e. 5-10 times that figure. And the 11th Five Year Plan added only around 53.12 GW, or a little over 10 GW per year. In fact, the last year (2011-12) was particularly a good one with installation of 20.5 GW. In other words, despite the best attempts of the ‘powers’-that-be in scuttling our growth in the past decade, the economy has somehow pulled itself together and kept up the heat.
Clearly, it appears that countries are perceived very similarly to companies today, and you are only as good as your last quarter. By that yardstick, the Indian economy is still struggling with a depressed GDP growth of 5.5% for Q1, 2012-13; which makes it 9 consecutive quarters of declining growth rates. The surprising part is the shock and awe most Indians feel with this slowdown, as if they were in the middle of a rude awakening! That’s really because even till June last year, the government was predicting 9% GDP growth for India in FY 2011-12 and the RBI was looking at an 8% figure!
However, as B&E had concluded from its statistical analysis last year (refer B&E’s issue dated August 4, 2011 titled “The Upcoming Indian Economic Slowdown”), there were really no surprises. We had predicted it based on a multifactor correlation analysis using inflationary trends in India as the base. Interestingly – and snapping back temporarily to the start of the past decade – during the year 2000, the Indian economy followed a trend in inflation similar to the US. The trend was again repeated in 2010 when the Indian economy mirrored the US economic condition of 2008 just before it (US) stumbled into a deadly recession. As per our polynomial forecasting trend line analysis, the correlation will continue till the end of 2012 with its impact lingering till the last quarter of this fiscal year. So our prognosis is that India would see a relatively depressed growth at least till FY 2012-13. But all is not lost. In fact, this trend is based on the fact that the government will continue to simply do nothing to reverse the situation. In other words, it’s quite easy to electrifyingly turnaround our prognosis.
What is it that our government spokespersons – including our Prime Minister – have done best in this economic slowdown? Blame external factors, and that’s quite a convenient thing to do at the moment! The US grew by 1.7% yoy for the quarter ending June 2012 as compared to 2% for the previous quarter. The Eurozone remained in a quandary with GDP shrinking by 0.4% yoy for the quarter and jobless rates at a record high of 11.3% in July. And that’s why the escapist reasoning by the government. But then, that is hardly an excuse for not setting our own house in order. There is no denying the fact that the Indian economy has sufficient potential of its own accord, and if given the right impetus, India can indeed get back to 8-9% and beyond sooner than expected. B&E and IIPM Think Tank present 10 critical ways in which we can bring the economy back to its high growth phase.
When the northern, eastern and north eastern power grids in India collapsed in July and left more than half the country in the dark, it was declared to be another vivid indicator of India’s incredible growth story having run its course (following S&P’s downgrade, which predicted that India would be the first fallen angel among the BRICs). What the world chooses to ignore is that structural flaws in our power sector in generation and T&D have been holding back our economy for years, including the years where they felt so overtly optimistic (and even insecure) about India’s potential on the world stage. For the record, India achieved a net capacity addition of around 4 GW per year from 1997-2007. But a McKinsey report (however much you might wish to believe it) indicates that a growing India’s needs from 2007-2017 merit a net capacity addition of 20-40 GW per year, i.e. 5-10 times that figure. And the 11th Five Year Plan added only around 53.12 GW, or a little over 10 GW per year. In fact, the last year (2011-12) was particularly a good one with installation of 20.5 GW. In other words, despite the best attempts of the ‘powers’-that-be in scuttling our growth in the past decade, the economy has somehow pulled itself together and kept up the heat.
Clearly, it appears that countries are perceived very similarly to companies today, and you are only as good as your last quarter. By that yardstick, the Indian economy is still struggling with a depressed GDP growth of 5.5% for Q1, 2012-13; which makes it 9 consecutive quarters of declining growth rates. The surprising part is the shock and awe most Indians feel with this slowdown, as if they were in the middle of a rude awakening! That’s really because even till June last year, the government was predicting 9% GDP growth for India in FY 2011-12 and the RBI was looking at an 8% figure!
However, as B&E had concluded from its statistical analysis last year (refer B&E’s issue dated August 4, 2011 titled “The Upcoming Indian Economic Slowdown”), there were really no surprises. We had predicted it based on a multifactor correlation analysis using inflationary trends in India as the base. Interestingly – and snapping back temporarily to the start of the past decade – during the year 2000, the Indian economy followed a trend in inflation similar to the US. The trend was again repeated in 2010 when the Indian economy mirrored the US economic condition of 2008 just before it (US) stumbled into a deadly recession. As per our polynomial forecasting trend line analysis, the correlation will continue till the end of 2012 with its impact lingering till the last quarter of this fiscal year. So our prognosis is that India would see a relatively depressed growth at least till FY 2012-13. But all is not lost. In fact, this trend is based on the fact that the government will continue to simply do nothing to reverse the situation. In other words, it’s quite easy to electrifyingly turnaround our prognosis.
What is it that our government spokespersons – including our Prime Minister – have done best in this economic slowdown? Blame external factors, and that’s quite a convenient thing to do at the moment! The US grew by 1.7% yoy for the quarter ending June 2012 as compared to 2% for the previous quarter. The Eurozone remained in a quandary with GDP shrinking by 0.4% yoy for the quarter and jobless rates at a record high of 11.3% in July. And that’s why the escapist reasoning by the government. But then, that is hardly an excuse for not setting our own house in order. There is no denying the fact that the Indian economy has sufficient potential of its own accord, and if given the right impetus, India can indeed get back to 8-9% and beyond sooner than expected. B&E and IIPM Think Tank present 10 critical ways in which we can bring the economy back to its high growth phase.
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Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
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IIPM Global Exposure
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IIPM Links
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