Mumbai: The 2000-2009 decade has been one of heady growth for India and Indian business. The benchmark Sensex touched 5,000 points on 31 December 1999. Today, the index is over three times that level at 17,000. India’s foreign reserves at that time were $34 billion (around Rs1.6 trillion); today they are almost $290 billion.
Economic view: (from left) ICICI Bank non-executive chairman K.V. Kamath, MphasiS founder Jerry Rao and Tata Sons executive director R. Gopalakrishnan are optimistic about the country’s growth prospects.
As the year winds down and the decade comes to an end, ICICI Bank Ltd’s non-executive chairman K.V. Kamath, MphasiS Ltd founder Jerry Rao and Tata Sons Ltd executive director R. Gopalakrishnan speak to CNBC-TV18 about the road ahead for the Indian economy in the next decade. Edited excerpts:
Would jobs still be guaranteed as they were in the last 10 years, thanks to the information technology-business process outsourcing (IT-BPO) boom?
Rao: I think the BPO-IT industry will still continue at a 20%-plus growth rate, maybe not the 30s. The base is very big. The key question is that we have two labour markets. Anybody who knows English will get a job and anyone who doesn’t is going to find it tough. So you will find that dichotomy. But there will be no problem for anyone in their 20s who knows English to get a job in the services sector—domestic services or export services. I don’t think that’s a problem at all.
Do you think that infrastructure constraints may perhaps go away in at least the latter half of the next decade?
Kamath: I don’t think so... If you look at China, I think they are still investing in infrastructure. Let’s look at what we have to do. Many people don’t understand what has really changed.
Nobody has seen so far a nation with over a billion people add a trillion (dollars) to the economy every four-five years. Never before in the history of the world has this happened. So whatever any economist may think, these numbers have never been seen.
I think these numbers need to be understood and digested. Not that I have digested it but I can get the contours of it. So as China grows from, say, $2,500-3,000 per capita to $5,000, there is going to be a hunger for infrastructure.
Maybe they are a little bit ahead of the curve. But the fact is that we will have to invest even at the basic level. We are far short of infrastructure even for a trillion-dollar economy today. So we will have to invest for a trillion and then take it up to a $2 trillion economy. So we may run temporary surpluses. But in terms of infrastructure, that is going to be a big driver over the next 10 years.
So to put it differently, one infrastructure, whether it is basic infrastructure, urban rejuvenation, urban dwellings, urban centres and also what I call the bottom of the pyramid transiting upwards...you will find 700 million people coming into a category which we will call (financially) included and their aspirations being met...
I would be conservative in putting growth at 10%. My belief is that if we get some of the reforms that we discussed, we really would be hitting probably the teens, and we would probably be in the 13-15% range... But 10% is a given and there are a whole set of drivers.
The Tatas have always planned ahead of the country. They put up the first steel plant, the first textile plant, the first airline, etc. Even the first administrative service came from the Tatas. If the Tatas would ask you to tell them what you should plan for the next decade, where would you advise investment?
Gopalakrishnan: I would choose three areas. We are dabbling in all those areas a little bit. The first is drug discovery. I think it is the next new vision, like IT was in the 1990s. The second is engineering design—automotive and engineering design. I think we are beginning the journey up. The third is the whole area of supercomputing. All these are in the technology areas. The Tatas haven’t asked me but if they did, this is what I would say. I came into this interview thinking I am very optimistic. But after listening to my colleagues here, I feel I am very pessimistic—(I) don’t feel as bullish as them. I feel very bullish, but it is a question of degree.
Rao: The issue is just looking at the base numbers of savings rate and incremental capital output ratio—8-10% is a given as far as I can see.