Following up their recent research on India, Goldman Sachs and Co. economists Jim O’Neill and Tushar Poddar have come up with a report on 10 things the country needs to do to achieve a per capita GDP of at least $20,000 (Rs8.58 lakh today) by 2050 (from less than $1,000 now). That target looks difficult when seen in the light of the investment bank’s annual report on Growth Environment Scores, a study where a score from 1 to 10 is assigned to 13 variables that define an economy’s productivity and growth sustainability. In this report, India scores below the other Bric nations (Brazil, Russia, China) and is ranked 110 out of 181 countries studied. However, Poddar and O’Neill say that by undertaking required reforms, India can still reach its 2050 target by increasing “its growth potential by as much as 2.8% per annum”. Edited excerpts:
1. Improve governance.
2. Raise educational achievement. According to our basic indicators, a vast number of India’s young people receive no (or only the most basic) education. A major effort to boost basic education is needed.
3. At the other end of the spectrum, India should also have a more defined plan to raise the number and the quality of top universities.
4. Control inflation. We think a formal adoption of inflation targeting would be a very sensible move....
5. Introduce a credible fiscal policy. We also believe that India should introduce a more credible medium-term plan for fiscal policy. Targeting low and stable inflation is not easy if fiscal policy is poorly maintained.
6. Liberalize financial markets.
7. Increase trade with neighbours. In terms of international trade, India continues to be much less “open” than many of its other large emerging nation colleagues, especially China... We would recommend that India target a major increase in trade with China, Pakistan and Bangladesh.
8. Increase agricultural productivity.
9. Improve infrastructure.
10. Improve environmental quality. Achieving greater energy efficiencies and boosting the cleanliness of energy and water usage would increase the likelihood of a sustainable stronger growth path for India.
Source: Goldman Sachs; Global Economics Paper No. 169