Economic Dilution

Indian economy is one of the fastest growing economy in the world, a fact that we are all well versed with. Over the past few years it has achieved a significant growth rate close to 8-9%. It is projected that the Indian GDP will surpass the American GDP by 2041 if the growth rate continues to be at the current level over the next 30-40 years. If we look at the sector wise break-up, then the major chunk of our GDP is contributed by the services sector which is close to 60% and the rest being added by agricultural and industrial output each being close to 20%. Okay! enough of numbers. The major driver of our economy is the services sector and the economy owes a lot to the global dominance of our outsourcing and IT capabilities. But a bigger question which crops in my mind is whether we are relying excessively on this outsourcing bandwagon for our economy to grow! The services industry employs just 15-20% of our population. Isn't this creating some kind of income disparity in our society? This economic sensation isn't tickling the majority of Indians who depend on agriculture for their living. The whole 'India Shining' thing looks like a mirage.

We consider ourselves as the champions of this outsourcing business. But can we claim to be the kings forever? Can we continue to beat our slowly rising opponents and prevent them from taking a share out of the 'pie which belongs to us'. India is undoubtedly the most preferred outsourcing destination because of ample availability of skilled manpower, low payscales compared to western countries and our proficiency in english. But can we sustain our presence in the outsourcing universe and continue to grow at this unprecedented rate with the salaries rising rapidly and other nations like Philippines, Thailand and China embarking on this novel journey? The growth enjoyed by India today is confined within the boundaries of mega cities and doesn't seem to percolate down to the lowest order. Now just try to imagine our economy sans outsourcing! Does the picture look scary to you? It certainly looks like that to me. In finance we learn that "Dont put all your eggs in one basket"..yes the diversifying business!! But are we pegging all our hopes on this single machine? Shouldn't we move ahead and diversify our economy for it to be more robust and sustainable? I am not becoming paranoid here but as they say that nothing is permanent and so might be the case with this outsourcing thing. Even if we continue to outsmart the impending competition which we might face in our arena, still the growth extracted out of it is not far reaching as I mentioned. We definitely need to vitalize our other sectors for an all round development which we aim to achieve. 

If we look at our agricultural sector, then we find that the agricultural output of India is second in the world just behind China. This is in spite of all the perils like flood and drought which the nature throws at us. But Indian agriculture suffers from some serious problems like poor productivity, limited use of technology, poor irrigation facilities, poor infrastructure like power etc. The farm output per unit land is quite low compared to the global standards. The growth rate of our agriculture is also quite low at 4-5% which is below the overall growth level of our nation. The government is playing its role in improving the condition of our agriculture but catering to the needs of the largest part of our society is rather difficult. Provision of subsidies, farm credit and insurance seem to be good ways of dealing with the problems but turn out to be less effective because the root cause of the problems is not attacked. 

Industrial output of India also speaks less in the growth story. China remains the undisputed leader of the manufacturing business and the industrial output of China alone is more than the whole of India's GDP. I read somewhere that today China exports more in 1 day than what it used to export in the whole of year 1979. India is lagging colossally on this front. Even small countries like Mexico and South Korea produce more than India's industrial output. Why India is not able to  perform well in this area? The obvious reasons which prevent this sector from picking up are the hindrances created by poor infrastructure, unattractive FDI policies, outdated labour laws and excessive red-tapism. We need to energize this sector urgently if we wish to experience an all round growth and prosperity. The industrial sector holds a great promise for employing the vast majority of population having lower literacy levels. Services sector is definitely incapable of delivering this. I believe that infrastructure holds the key for triggering growth in manufacturing sector. There is an immediate need to improve the infrastructure which includes power, airports, ports, roads etc. The industrial sector can make our economy more robust and help in achieving a sustainable growth rate. These things are certainly easier said than done. The road to prosperity is rather difficult to traverse, but definitely not impossible!

We must think about rising from all directions and shed our dependence on just one business. We got to enter new realms by challenging our competitors in their own domain and beat them before they try to beat us. Only then we can realize a nation which the world will really look upto.