The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.
February - 2007 - issue > In Focus
Latest Happenings In Focus
si Team
India’s Rising Growth Potential
The recent report on BRIC countries, Goldman Sachs predicted that India would grow at a sustainable eight percent till the year 2020, and its influence on the world economy will be bigger and quicker than implied in their previously published BRICs research. Excerpts.
India’s high growth rate since 2003 represents a structural increase rather than simply a cyclical upturn. The recent growth spurt was achieved primarily through a surge in productivity; with a turnaround in manufacturing productivity being central to the ratcheting up of productivity growth. The private sector was the principal driver of this turnaround, as it improved efficiency in the face of increased competition due to the cumulative effects of a decade of reforms.
The country is well positioned to reap the benefits of favorable demographics, including ‘urbanization bonus,’ over the long term, due to the continued movement of labor from rural agriculture to urban industry and services. India has 10 of the 30 fastest-growing urban areas in the world and we estimate a massive 700 million people (roughly equivalent to the entire current population of Europe) will move to cities by 2050. This will have significant implications for demand for urban infrastructure, real estate, and service, and could play a role in increasing potential growth rates. Investments made in highways and communication will reduce travel time and enhance connectivity, and that will drive growth further. We estimate that India would need to boost its investment rate by another 16 percent of GDP to achieve and sustain a growth rate of 10 percent.
The risks to growth are: political risk, including a rise in protectionism; supply-side constraints, including business climate, education, and labor market reforms; and environmental degradation.
The last one, in fact, is critical. The country remains largely rural, and normal monsoons are the life-blood of the system. With increased urbanization, and a burgeoning need for energy, India will be a large contributor to global warming. Climate change can cause erratic monsoons, with grave implications for rural incomes and overall growth. In order not to hamper the growth process, India will need to put in place policies that are increasingly environment-friendly.
The recent report on BRIC countries, Goldman Sachs predicted that India would grow at a sustainable eight percent till the year 2020, and its influence on the world economy will be bigger and quicker than implied in their previously published BRICs research. Excerpts.
India’s high growth rate since 2003 represents a structural increase rather than simply a cyclical upturn. The recent growth spurt was achieved primarily through a surge in productivity; with a turnaround in manufacturing productivity being central to the ratcheting up of productivity growth. The private sector was the principal driver of this turnaround, as it improved efficiency in the face of increased competition due to the cumulative effects of a decade of reforms.
The country is well positioned to reap the benefits of favorable demographics, including ‘urbanization bonus,’ over the long term, due to the continued movement of labor from rural agriculture to urban industry and services. India has 10 of the 30 fastest-growing urban areas in the world and we estimate a massive 700 million people (roughly equivalent to the entire current population of Europe) will move to cities by 2050. This will have significant implications for demand for urban infrastructure, real estate, and service, and could play a role in increasing potential growth rates. Investments made in highways and communication will reduce travel time and enhance connectivity, and that will drive growth further. We estimate that India would need to boost its investment rate by another 16 percent of GDP to achieve and sustain a growth rate of 10 percent.
The risks to growth are: political risk, including a rise in protectionism; supply-side constraints, including business climate, education, and labor market reforms; and environmental degradation.
The last one, in fact, is critical. The country remains largely rural, and normal monsoons are the life-blood of the system. With increased urbanization, and a burgeoning need for energy, India will be a large contributor to global warming. Climate change can cause erratic monsoons, with grave implications for rural incomes and overall growth. In order not to hamper the growth process, India will need to put in place policies that are increasingly environment-friendly.
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