India: Emerging to Surging

[via Abhijit Gore] McKinsey Quarterly had an article in 2001 on India which still makes interesting reading. The basic premise: “In a decade, the country could more than double its gross domestic product per capitabut only if its government and people act quickly and decisively.” To double GDP in a decade, India needs a growth rate of just over 7% per annum. We finally seem to be getting there. But we should be able to do a lot better. The article had a 13-point prescription for India:

1. Completely eliminate the reservation of products for small-scale industry; start with 68 sectors accounting for 80 percent of output of reserved sectors

2. Equalize sales taxes and excise duties for all categories of players in each sector and strengthen enforcement

3. Establish an effective regulatory framework and strong regulatory bodies

4. Remove all licensing and quasi-licensing restrictions that limit the number of players in affected industries

5. Reduce import duties on all goods to the levels of Southeast Asian countries (10 percent) over five years

6. Remove the ban on foreign direct investment in the retail sector and allow unrestricted foreign direct investment in all sectors

7. Resolve unclear real-estate titles by setting up fast-track courts to settle disputes, computerizing land records, freeing all property from constraints on sale, and removing limits on property ownership

8. Raise property taxes and user charges for municipal services and cut stamp duties (tax on property transactions) to promote the development of residential and commercial land and to increase the land markets liquidity

9. Reform tenancy laws to allow rents to move to market levels

10. Privatize the electricity sector and all companies owned by the central and state governments; in the electricity sector, start by privatizing distribution; in all other sectors, first privatize the largest companies

11. Reform labor laws by repealing section 5-B of the Industrial Disputes Act, by introducing standard retrenchment-compensation norms and by allowing full flexibility in the use of contract labor

12. Transfer the management of the existing transport infrastructure to the private sector; contract out the construction and management of new infrastructure to it

13. Strengthen extension services to help farmers improve their yields

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.