Indian Prime Minister Narendra Modi has announced target of 5 trillion USD economy for India by 2024. For this to happen, Indian GDP growth should be well over 10% per annum in the coming years. India has never attained such a steep GDP hike during the last several decades. Seeing the pace of economic development, it appears that India is nowhere near attaining GDP growth of over 10% per annum and economy size of 5 trillion USD by 2024.
Around 2 to 3 decades back, Indian and Chinese economy were placed in similar situation. However, Chinese economy grew very rapidly due to the pragmatic and proactive policy of Chinese government. Indian economy is now at least 20 years behind the Chinese economy size.
The secret of spectacular Chinese success in expanding it’s economy was the fact that China threw away it’s so called communist philosophy lock stock and barrel, though China continues to claim that it is communist government just for propaganda purpose. Knowledgeable observers know that todaythe Chinese economy is largely capitalist oriented and has no semblance of communist philosophy.
China realized around three decades back that it was lagging behind developed countries in the investment capability and domestic technology source. Chinese government simply opened its economy, liberalized its policies on import of technology and investment and allowed the multinational companies to invest in China in variety of sector with practically no restriction.
Given the fact that the market in developed countries are getting saturated and China’s size and population offer potential market opportunities, overseas companies enthusiastically responded to China’s liberalized industrial and economic policies. In the process, both China and multinational companies gained advantages and it has been a case of mutual advantage and win-win situation for both.
Chinese government ensured that the overseas projects in China would operate smoothly without any labour unrest issues and in peaceful atmosphere. It also created several industrial parks ,where the overseas companies would operate in conducive atmosphere that they are familiar with.
When overseas investments came in a big way along with technologies, Chinese industries also gained by getting familiar with developed technologies and domestic industries too developed in the process.
Without such massive import of technology and investment, China could not have recorded such impressive growth, which has now made China look like a super power, challenging the United States of America. Today, America is certainly scared that China could out beat it in the global arena. To the credit of China, it should be noted that domestic industry in China ensured that they would progress along with the multinational companies, absorbing technologies and gaining investment capability due to improving economy.
India under the leadership of Mr. Modi has to emulate China in encouraging and welcoming overseas investment and technology.
The ground reality in India is that state of Indian technologies in several sectors are extremely inadequate and below the standards of developed countries. The Indian project promoters lack confidence in domestic technology and are unwilling to invest their money based on domestic technology. Further, the investment culture in India is also not on par in the global standards and it appears that several investors in India desire to invest in trading business rather than manufacturing activity.
While Indian economy is certainly growing though not at the level of need of India, most of such growth is due to the performance of the services sector and not due to expansion of manufacturing base. In fact, India is becoming a dumping ground for import of commodities, since manufacturing capacities are not being built in tune with the domestic demand growth.
Certainly, emulating Chinese model by liberalizing import of technology and investment for achieving massive growth of Indian economy is vitally needed. However, there are a few problems in emulating such Chinese model in India.
China is a totalitarian country, where dissent and any labour issues like strike moves are put down and suppressed ruthlessly, India cannot enforce such strict regulations due to its democratic set up and highly politicalized trade unions in India. Therefore, the level of comfort feelings that China ensured for overseas investors operating in China cannot be ensured in India.
In encouraging overseas investment and technology, Indian Prime Minister Narendra Modi has a challenge to be met. He has to skillfully adopt a stick and carrot policy to ensure that overseas investors would feel confident to operate in India. It remains to be seen how Mr. Modi would be able to enforce discipline in India similar to what China has done, which is absolutely needed to meet the massive growth of the Indian economy that Mr. Modi is targeting.