15% GDP growth through "relay" economy

By 2022, India is set to become the world’s youngest country with 64 per cent of its population in the working age group. The average Indian would be 29, compared to 37 for China and the US, and 45 for Western Europe. This demographic dividend offers India an unparalleled opportunity to rev up the growth engines of our economy with abundant capital liquidity for India (due to global macroeconomics), large domestic market and pro-reform legislations including GST

The same demographic situation, is also an unprecedented threat if India is not able to create meaningful jobs and access to opportunities for the 100 million people. It will not just derail the economic growth but threaten our internal security and our political stability. If India, has to create meaningful jobs for the 100 million people and uplift 400 million people out of poverty, our growth aspiration has to be 15% and not 10%. China has shown that 15% growth rate is possible for a large country with demographic advantage. China’s growth was largely led by infrastructure spending and manufacturing exports. India’s 15% growth has to come with lower capital expenditure, higher employment generation and rely on higher domestic consumption. This is a tougher path, but not impossible. It requires India to chart out a unique plan and execute to perfection. One such bold idea is to build India into a 24x7 “relay” economy with 2-3 times higher labor to capital ratio, creating significantly higher jobs and marketplace for higher domestic consumption.

Imagine a scenario wherein the economy (and marketplace) was to run for 24 hours non-stop which is production and commerce of goods and services is happening around the clock. The same capital assets (land, machinery, offices, retail shops, malls, banks, educational institutions and others) start producing 3 times the output. The labor to capital ratio of the economy increases by 2-3 times. Given the demographic benefits and cheaper labor, the supply of goods and services is lower cost leading to higher domestic consumption and exports. The economics of the trade can now support higher wages (due to productivity benefits) leading to higher number of youth drawn to these jobs. The market dynamics (buyer and supplier) will invest in skilling as the quality and wages in jobs increase (the biggest reason for lack of skilling is lack of quality jobs and poor wages). The higher quality education institutes can deliver 2-3 times more scientists, engineers, doctors, lawyers and other (South Korea used this approach effectively in 1970s to increase the output of tertiary education institutes by making them operate 24x7). Our court rooms can now process 2-3 times the number of cases they process today leading to higher law and order. The list of impact is endless. This requires the economic activity to be passed on across working shifts like a “relay”.

The idea has been piloted and scaled in the transportation sector through “relay trucking”.

India needs 1 million new truck drivers every year for the next 10 years to support our GDP growth aspiration. This is second only to construction workers and can contribute to 10% of the employment agenda of this country. If the current situation continues, it is estimated that India will have 480 drivers to every 1000 trucks on the road by 2022. This is a serious threat to growth of Indian economy and can derail our growth potential in the coming years. It is an unprecedented risk that our nation faces today and we as a nation need to address it now.  Through a nation-wide network of “relay pit-stops”, the truck drivers lives have transformed from months away from home jobs to day jobs. Each pilot drives from pit-stop to pit-stop (4-5 hours) and returns taking another vehicle to home location by the end of the duty every day. This means they spend less time away from their families and lead meaningful and balanced lives. The relay model also cuts down any down-time on the road since the driver change happens within a few minutes. It helps connect India faster by guaranteeing reduction in turnaround time by 50-70% when compared to other road transport means. The truck (which is a capital asset) is utilized 2-3 times more and the customers get material in half the time. This speeds up the economy (every 10 KMPH higher speed on highway adds about 1% to the GDP) but also increases the labor to capital ratio in trucking by 3 times. Given the change in economics of the trade, the market is willing to invest in the truck driver skilling, youth wants to engage in this job and it makes transportation faster, cheaper and safer for the consumer of services.

The same principle of “relay” can be applied to any sector of the economy with similar or higher benefits. It will increase the capital efficiency, time to market (one cannot overnight create the number of hospitals, court rooms and IITs needed), lower the supply cost, increase the number of quality jobs and finally create an environment for demand and supply side to invest in skilling.

India needs bold and not incremental ideas. Our opportunities can turn into threats if we don’t act with tremendous speed. “Relay” economy can be India’s transformational idea and its execution will require a unique approach for every sector – technology to make the “shift” changeovers happen, land and labor reforms for 24x7 operations, role modelling by private sector champions and compelling story/ narrative by the government to drive this (including select government departments working). The invisible hand of the market is incredibly powerful and it can create social and gender parity, alleviate poverty and create meaningful jobs only if we embrace bold ideas and execute at pace.

The author is founder and CEO of India’s fastest growing logistics company, RIVIGO