Shiv Khera – Can We Achieve a US $5 Trillion Economy by 2024?

Investment Outlook , Published Feb 19, 2020

The answer is yes we can, provided we have the political will.

Do we have the political will? If yes, then we need to do the following immediately (within the next three months) and not in 2023 as an election gimmick. To achieve our objective of becoming a US $5 Trillion economy, we need to have a two-pronged approach where we make India an attractive destination for investment and prevent capital from fleeing India by eradicating negative elements in the system.

Risk: What will make India an attractive destination for investment? The risk-reward ratio of investments makes them a preferable option. If the risk is low and the rewards are high, money flows in. Unfortunately, in India the risks are high and the reward is low.

Redressal System: The one big risk that investors face is, in the case of any dispute or problem, they have no recourse or redressal system because of our inefficient judiciary. According to former CJI Dipak Misra, in June 2018, over 33 million cases were pending in Indian courts. The judicial system protects the criminals and punishes the honest. Until there are judicial reforms, both domestic and international investors will continue to shy away from risking their capital.

Corruption: The second risk factor is the ‘Ease of Doing Business’ in India. Even though we have moved up a few notches on the international rating, the ground reality is quite different. It is very difficult to do business in India because of the corrupt political and bureaucratic system. An entrepreneur gives up before he can set up a business because he is unable to satisfy the greed of those in positions of power.

I know three NRIs who were looking to bring in close to a billion dollars of foreign investment to India but were so disheartened that they stopped pursuing their potential business ventures in India – putting up with the greed of Indian politicians and bureaucrats was challenging for genuine investors. Hence the risk remains high.

11 points reform

• India’s tax structure needs to be revised. Our highest rate of personal income tax is 42 percent. Any person who buys consumer goods after paying 42 percent has to pay an additional 18 percent GST. On top of this, they still have to pay other taxes like petrol tax, house tax, car tax, luxury tax and so on. By the time the individual pays all the taxes, he or she is probably left with close to 30 cents on a dollar. This is not much of a reward for any entrepreneur.
• We need to introduce a single rate GST and make compliance processes simpler.
• The Indian entrepreneur is at a big disadvantage because he or she borrows money from banks at high rates of interest – at least 12-14 percent. Most competitive nations let entrepreneurs borrow at a 3-4 percent rate of interest.
• To make the ‘Make in India’ campaign a success, the Government should give a 100 percent write off for all capital investments in business and agriculture.
• We need to change laws to make India more competitive. The textile industry, for example, is unable to compete with small countries like Bangladesh, Vietnam and Turkey. India faces higher costs of manufacturing than ever before for the following reasons; 1) Export benefits have ceased 2) GST has led to a higher cost of raw materials as well as made the finished products more expensive and therefore, less competitive in the global markets 3) Shortage of skilled and unskilled workers and 4) Because of anti-dumping laws for synthetic yarns, many entrepreneurs continue to move their manufacturing facilities to Turkey or Vietnam.
• We need to drive our GDP to a double-digit growth figure of 10 percent. At the same time, the reward of this growth needs to be inclusive, i.e. out of the 10 percent, 9 percent should not go to just 10 families and the remaining one percent distributed among the rest of the country. Such lopsided growth brings in more disparity and makes the rich even richer and the poor even poorer. We need to bring mass employment opportunities and work towards alleviating poverty.
• A common dilemma that exists in the minds of Indians is that on one side there is massive unemployment and on the other side there is a dearth of qualified people to fill these jobs. To the extent that hotels poach waiters and captains from one another. In big cities, there is a shortage of drivers. This situation can only be rectified by setting up vocational schools. China has 5,00,000 vocational schools, whereas India has only 50,000 vocational schools. We need to get the number up to 1,00,000 vocational schools and create 50 million jobs, in the next 36 months.
• We must increase our investment in infrastructure. Even though there is a reform in the infrastructure sector in India, there is a need for acceleration to achieve our target of becoming a US $5 trillion economy.
• We need to have a population control policy to improve the quality of life. India’s population has surpassed China’s population. A total of 122 crore people have Aadhaar cards and an additional 25 crore people are either unaccounted for or illegal in the country. Per minute, 11 children are born in China as compared to 33 children per minute in India. Our economic growth and resources are unable to keep up with the rapidly increasing population of India.
• We need to look into alternative energy options and reduce oil imports by 90 percent. For example, in Israel, solar power is mandatory in every building. By using ethanol, Brazil has reduced its oil imports by 90 percent, which will enrich farmers and prevent loss of foreign exchange. Examples of such success stories exist in India as well – College of Jesus and Mary in Delhi and the Cochin International Airport have adopted solar in a big way.
• We must manage our waste like other countries such as Singapore, Japan and Sweden. Japan has converted 100 percent waste into productive energy. Sweden’s waste management system recovers more energy per ton of waste than any other country. Sweden is on route to achieving 0 percent waste by utilising and recycling their waste. In fact, they have started importing waste from other countries.

To achieve our objective, we need to set time-bound goals and a practical plan to implement it. In conclusion, I would like to say that it is better to have a good plan that’s well implemented than a great plan that’s poorly implemented. Our political leadership needs to think of the next generation, and not just the next election. It is important to keep national interest above personal interest to achieve the target of India becoming a US $5 Trillion by 2024.

About Shiv Khera

Shiv Khera is an author, educator, business consultant and a motivational speaker. He is the author of `You Can Win’, an international bestseller that has sold over 8 million copies worldwide. He has been honored by The Lions International and Rotary International for his work.

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