Jim O'Neill: A 10-step programme to tap into India's potential

Economic View: Growth of more than 10 per cent over the next 10 to 20 years is not out of the question

It's fashionable to say the era of strong emerging-market growth is over. As the US recovers, the global cost of capital will rise, holding back investment – against this background, avoiding the next crisis is the best that most emerging economies can do. If you take this view, India might seem a perfect example, with its widening current account deficit, heavy public borrowing, persistent inflation and weak currency.

I don't think so. As a general matter, emerging-market gloom is overdone. India, in particular, could teach the pessimists a lesson.

Last week I made a quick visit to see the chief minister of Gujarat, Narendra Modi. He'd asked me to give a presentation on how India could realise its still-enormous potential. I went through points I'd first discussed in a paper I co-authored with Tushar Puddar in 2008, "Ten Things for India to Achieve its 2050 Potential". It's striking to me that, five years later, our recommendations don't need revising.

I'll state no opinion on Mr Modi's chances of becoming Prime Minister after next year's general election – it's been announced that he'll lead the opposition Bharatiya Janata Party in that campaign.

He's a controversial figure. Detractors call him a sectarian extremist (and worse). I will say this: he's good on economics, and that's one of the things India desperately needs in a leader.

Like all Indians, Mr Modi loves acronyms. Me too. I admire his MG-squared (minimum government, maximum governance) and P2G2 (proactive, pro-people, good governance). That sums it up pretty well. I don't think it's a coincidence that Gujarat has avoided the slowdown which has almost halved India's national rate of growth. The state just keeps on growing at double-digit rates.

Long-term growth depends ultimately on just two things – the number of workers and how productive they are. India's demographics are remarkable. The country is on track to grow its workforce by 140 million between 2000 and 2020. That increase is the equivalent of the working population of France, Germany, Italy and the UK combined.

Even with unspectacular growth of a little more than 6 per cent a year, by 2050 India's economy could be 40 times bigger than it was in 2000 – about as big as the US economy will probably be by then (though not as big as China). But it could do so much better than that. Growth of 8.5 per cent over the entire period is possible – with growth of more than 10 per cent over the next 15-20 years not out of the question – provided it makes some changes.

It's all about productivity. India scores poorly on indexes of economic variables that are critical for economic efficiency – worse than Brazil, China and even Russia. To change that, it needs to do 10 things:

1. Improve its governance. This is probably the hardest and most important task – the precondition for the rest. Mr Modi is right: whoever leads the next government in 2014, India needs maximum governance and minimum government. There is no point having the world's largest democracy unless it leads to effective government.

2. Fix primary and secondary education. There's been some progress here, but a huge number of young people still get little or no schooling. I sit on the board of Teach for All, a global umbrella organisation for groups that encourage the brightest graduates to spend at least two years teaching. Today India has about 350 teachers in these programmes. They could do with 350,000 or more.

3. Improve colleges and universities. India has too few excellent institutions. Its share of places in the Shanghai Index of the world's top universities should be proportional to its share of global gross domestic product. Make that an official goal.

4. Adopt an inflation target, and make it the centre of a new macroeconomic policy framework.

5. Introduce a medium to long-term fiscal policy framework, perhaps with ceilings as in the Maastricht treaty – a deficit of less than 3 per cent of GDP and debt of less than 60 per cent of GDP.

6. Increase trade with its neighbours. Indian exports to China could be close to $1 trillion by 2050, nearly the size of its entire GDP in 2008. But India has little trade with Bangladesh and Pakistan. There's no better way to promote peaceful relations than to expand trade – and that means imports as well as exports.

7. Liberalise financial markets. India needs huge amounts of domestic and foreign capital to achieve its potential – and a better-functioning capital market to allocate it wisely.

8. Innovate in farming. Gujarat isn't a traditional agricultural producer, but it has improved productivity with initiatives like its "white revolution" in milk production. The whole nation, still greatly dependent on farming, needs enormous improvements.

9. Build more infrastructure. I flew in to Ahmedabad via Delhi, and out via Mumbai, all in a day. I got where I needed to go – but it's obvious how much more India needs to do. Adopt some of that Chinese drive to invest in infrastructure.

10. Protect the environment. India can't achieve 8.5 per cent growth for the next 30-40 years unless it takes steps to safeguard environmental quality and use energy and other resources more efficiently. Encouraging the private sector to invest in sustainable technologies can boost growth in its own right.

India's potential is vast – and given the will, it can be tapped.

A version of this column was originally published by Bloomberg News

Suggested Topics
News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
filmDirector said film would 'never have been financed' with ethnic minority actors in key roles
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
film
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
ebooksNow available in paperback
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Extras
indybest
Life and Style
Fright night: the board game dates back to at least 1890
life
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

h2 Recruit Ltd: Head of Regional Sales - Financial Software - £130,000 OTE

Negotiable: h2 Recruit Ltd: A rapidly expanding, global Software/ SaaS Vendor ...

SThree: Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?