October 02, 2016

India' economy is not ready to quintuple within 15 years

In April 2016, Niti Aayog CEO Amitabh Kant gave a 2032 date to India becoming a $10-trillion economy, a year after Prime Minister Narendra Modi said India should dream of a $20 trillion economy but did not fix a target.

India wants to accelerate GDP growth to 10% growth per yaer against its projected growth rate of 7.4% to achieve a $10 trillion economy by 2032.

If India grows at 7% till 2032, its GDP will only be $6 trillion in 2032 against $2 trillion as on today while 5-6% of the population will remain below poverty line. The new plan flows out of a Group of Secretaries report that talked of achieving 10% growth "year-on-year in the next five years" by aiming at 10 'Champion States' growing at 12% and more, 4% agricultural growth rate, 10-12% growth in manufacturing and services, worldclass infrastructure and the advancements in technology and innovation.

Energy infrastructure is lagging India's economy. If India was growing at 10% per year then they would need about twice the power within 8 years.

India has world's fifth largest coal reserves and still faces acute power crisis. India's per capita power sector consumption, around 940 kilo watt-hour (kWh), is among the lowest in the world. In comparison, China has a per capita consumption of 4,000 kWh, with the developed countries averaging around 15,000 kWh of per capita consumption

India is currently facing energy crisis with its major dependency on coal, crude oil imports to meet sharply growing energy needs of the country. More than 40% household lack access to electricity.

The current power infrastructure in India is not capable of providing sufficient and reliable power supply. Some 400 million people have zero access to electricity since the grid does not reach their areas.

Another problem is unstable power supply. There are frequency fluctuations caused by load generation imbalances in the system and this keeps happening because consumer load keeps changing. Frequency is the most crucial parameter in the operation of AC systems. The rated frequency in India is 50.0 Hz. While the frequency should ideally be close to the rated frequency all the time, it has been a serious problem in India. Poor power quality control has knock-on effects on equipment operation, including large-scale generation capacity. Equipment damage can, of course, further compromise supply and aggravate the effects of chronic fuel shortages.

Cities are far more productive per capita versus rural areas. Urbanization has been relatively slow in India, with the share of the population living in officially classified urban settlements growing at a rate of just over 1.15 percent a year from 2001-2011.

Messy urbanization is reflected in the almost 65.5 million Indians who, according to the country’s 2011 Census, live in urban slums, as well as the 13.7 percent of the urban population that lived below the national poverty line in 2011.

The 2015 livability index of the Economist Intelligence Unit ranked New Delhi 110 out of 140 cities, highest of the six South Asian cities in the Index. Mumbai was ranked 115. The average ranking for all developing country cities outside of South Asia was 103.

China has been accused of overbuilding. But to move 250 million people into cities in 12-20 years means that the new urban areas have to be built 12-24 months ahead of time. The roads, electrical main lines and the sanitation.

India has the demographic advantages of a youthful and productive population. India does have the demographic disadvantage of nearly 45% of the population having brain damage from stunted growth. Still India should able to lift up the 55% of the population.

India needs to double its energy production within 5-7 years and then double it again in the same timeframe.
India needs to build up roads, ports and airports.

China is eager to build these things for all of Asia and Africa and South America.

Developing countries like India should take advantage of this to get the foundations for future growth built.

Ever since China launched OBOR, most Indian analysts have regarded it more as a threat than an opportunity. Only a minority, consisting almost entirely of economists, have seen it as an opportunity to modernise India’s stone age infrastructure and pave the way for rapid industrialisation and employment growth. What it turns out to be will depend entirely upon what India wants it to be.

The incontrovertible fact today is that China has the finance capital, the technology and above all the overwhelming need , in its own national interest, to accelerate the development of these countries to an extent that could not have been imagined even half a decade ago. It is also an incontrovertible fact that the tunnel, road and rail links that it intends to build will pierce the natural ramparts of South Asia, the Himalayas, and end India’s geographical hegemony over the rest of south Asia.

If India chooses to stay out of OBOR it will only increase its isolation within South Asia, and hasten the end of its regional hegemony. But what will be even less excusable is that it will pass up a once-in-history opportunity to harness China’s economic muscle to India’s development. The way to avoid this is to join OBOR, invite Chinese investment in Indian infrastructure, and use the connectivity this creates to increase trade and investment with other south Asian countries and, of course, with China.

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