At the outset, let us be clear on this - whosoever comes to government, they should not criticize the other on oil and rupee price behaviour. That is wrong as several structural factors play role on these issues.
Short term remedies can only postpone the problem. We need to understand that offering Forex swap by RBI against the Forex from FCNR(B) deposits like last time, NRE bonds, NRNR deposit at higher rates, high NRE interest are all short term solutions. We postpone the problem to future or we encourage NREs to borrow abroad and make advance remittances to avail high interest rates (arbitrage). But the fact is India needs to enhance its Forex earnings. Making it only from software is not sustainable in the long run.
What do we do in long run?
- Raise the export sector, manufacturing sector, agri sector to a 25% level with service also at 25% level. Today 80% population giving 20% GDP and vice versa. Service led growth can not make our GDP double in five years. If we have to grow to a 5 trillion USD economy, we need to double in five years. Domestic demand driven model alone is not enough. It has to be export, manufacture, services and agri. Just saying we grow at 8% continuously will not do. We can not sustain that level of growth on as is where is basis. We need structural corrections.
- Export cannot be increased just like that. We need to make us competitive, innovative. That also needs radical changes in outlook, skill mapping, discipline , digitalisation, disruptive innovation, start up cultures and so on.
- We should think out of box for enhancing manufacture role (it is just a thought thrown away) say— made in India tag is not a very rosy one. In that case can we ride on the shoulders of Japan? They have an aging population. We have a sizable working population. We can synergise our strengths. We can do manufacture outsourcing for them in medium term. But we need a national consensus on allying with them and a disciplined work ethics. Organically improving our manufacturing sector to double our manufacturing share in GDP is a difficult process- it may never happen with our current work ethics. On manufacture I faced the problems of labour productivity and lost heavily as a manufacturing entrepreneur in India in the nineties. I have a first hand experience on facing this.
· Such partnering nations can be aimed at for manufacturing (with japan) bringing disruptive innovation in emerging areas (with USA & Israel )
- On oil we may need to understand when something can not be cured, it has to be endured. We need to have penalty for using more oil and both punitive (high price) & incentive measures to move us away from oil. We have fixed targets on using solar energy, electric cars and so on.
We should also utilise some of our uncommitted Forex reserves to acquire offshore shale oil fields and develop strategic reserves in non-tsunami ports.
The bottom line-
I only try to emit positive rays around me. I encourage youngsters to be positive but at the same time understand the big tasks on hand.. just being too noisy by crying rupee is depreciating and oil prices going up is not enough.
In my life time I want India to become a G3 nation. USA, China and then India. That means we have to topple UK (this year we will do), then Germany and then Japan. This means we double our GDP to 5 trillion level. I am optimistic we can do it in my life time. But I also know to achieve that, we need to have excellent discipline, high work ethics, less noises and more focus and finally number of structural changes along with a conviction to implement.
“In crucial things, unity. In important things, diversity. In ALL things, generosity.”
God bless India. -Drdd