How to fix India's economy!

At the very beginning I need to explain the mindset of a marketeer and that too one who primarily worked on FMCG. While the world talks about value at the bottom of the pyramid, we are the people whose livelihood actually depends on millions of customers buying products ranging from 50p to 10 Rs. So when we talk about our customers or consumers, we are talking about almost every Indian and therefore inclusive growth rather than growth of a few. In fact as I was telling a recent academician I met, upgrading 5 - 10% of my customers can never give me the growth the majority will provide, so we are not socialist but altruistic, always rooting for the mass of humanity at the bottom of the pyramid.

This article was triggered by my attending the India Economic Conclave where prominent Indian and international personalities spoke about the Indian economy and most importantly the plan to get to 5 trillion USD by 2025. While a lot of people made a lot of relevant points on the direction the Indian economy needs to take, there was some ambiguity on how will we reach there. Our strength of having the youngest population by 2021 is a huge strength but also translates to a huge requirement of jobs which means there is a necessity for more labour intensive industries. Now most economies which have grown rapidly have been the combination of good planning, astute leadership and/or natural resources. But most important of all is for our leadership (current or potential) to have their ear to the ground and understand what our population needs the most. Basis my understanding of the economy, the common consumer and some interesting talks and seminars, I thought I too could try and put together what does an average Indian need/want today. It (unfortunately) may not have changed over the years but in a changing economy where the focus is shifting to 'digital' and 'high tech', what India wants may sometimes be completely divergent to where the world is heading. Broadly summarising the discussion on needs and wants under the following topics

• Unemployment and the world's largest working population
• Agriculture and labour intensive industry
• Delinking agriculture from changing weather patterns
• Inclusive sustainable growth and development

Let's start with the Needs. India is supposed to have the largest growth in working population which means that we are set to be in a situation where the non working population costs gets distributed over a larger group of people which means the most critical thing facing India is

• Unemployment and the world's largest working population

Globally the world is looking at more automation, lesser manpower to run factories. This in a sense is the right direction to be taken by most of the world whose working populations are set to drop. Traditionally a drop in working population increased the welfare burden on the working class causing issues. What countries like Japan have smartly done now is a reduction in the manpower via automation which also means labour intensive jobs have gone down and supervisory jobs have increased. With improvements in health care, this could also mean a person will be employable for a longer period thereby increasing the band of working population.

India is going to be in that unique position where we will have a spurt in working population which traditionally meant a reduced welfare cost per capita. However this equation holds true only if employment grows at the same pace as the population. While these are ideal conditions for a nation's growth, increasing unemployment would have a terrible impact on the economy. A demand - supply mismatch means lower salary increase in the unorganised sector. Unemployment also causes the rise of crime and extreme poverty. Most revolutions in fact have started in situations where angry unemployed youth have tried to impart social justice which is why it is our responsibility to ensure our biggest potential strength becomes one. It is interesting to note that while the railways is India's biggest employer, 61.5% of India depends on agriculture as a source of direct or indirect employment

• Agriculture and labour intensive industry

In an interesting statistic while 61.5% of India depends on agriculture for livelihood, it contributes to only 14.8% of the GDP. In principle, India cannot exist without agriculture and yet agriculture has a very low GDP per capita. With weather variance and low MSPs, this also means 61.5% of economy would be at the mercy of nature and market prices. This means existing farmers are lagging behind other occupations, which means their kids will not be interested in getting into farming. This means that there will be more exodus from the farms to the city.

The bigger worry is that traditional labour intensive operations like mills, factories etc are not growing at the rate they should. While a China invested in labour intensive manufacturing facilities which helped increase employment, it was interesting to hear the decision makers on an economic conclave talk about growth in Agriculture as a lever of growth but planning for higher growth from Services. Services as a sector cannot be the engine of growth for a country with growing aspirations and doesn't cater to the large population of low skill workforce. Services also largely depend on increased private spend and therefore need GDP growth to increase private demand. The growth vectors as such that most of the world is looking at is Rural India which depends on agriculture and agriculture in India still depends on the clouds.

Now with the growing of the working class, a large percentage of whom will be low skill labour many of whom would have migrated from agriculture, we will need to start labour intensive manufacturing hubs today. Incentives need to be given to industries who can employ more people while we attempt to subsequently push a greater percentage to a higher skill range who can meet the services growth that will be triggered. Having heard policy makers talk about GDP growth through IOT and AI while interesting could ignore the fact that at the end of the day to leverage our working population, we need to give our youth work.

• Delinking agriculture from changing weather patterns

Uncannily all of India from the policy makers to the farmers to the industrialists look towards the clouds for a sign of the economy performing. The problem is so acute that country numbers are dropped whenever the monsoon under delivers and herein lies the issue. Indian monsoons have had a couple of seasons of erratic behaviour. El Nino effects and global warming is going to make rain based irrigation even more difficult to depend on and this is where we need a plan. The impact of dependable irrigation is best seen in Punjab and Haryana where farmer suicides are un heard of largely due to the perennial rivers providing a constant source of water. India needs to delink cropping from rain fed irrigation as it will not be a sustainable source of irrigation in the long term. Planning therefore needs to be for crop patterns that need lesser water and do not fail with a failed rain. Intuitive while this seems, sugarcane a water intensive crop is grown in many parts of Maharashtra while many face drought.

The farmer who resides in the rest of India today is now in an unending loop. poor rains means poor crops which causes a loss. Excellent weather means a bumper crop causing a drop in prices as we still don't have adequate storage facilities. The issue is the farmer is never able to predict supply and demand and therefore never able to plan properly. This is where the government needs to plan cropping for farmers. It is no longer a matter of choice as one way or the other the government pays for any losses made by the farmer. While these may sound socialistic in nature, the fact is the economy cannot afford 61.5% of its population being impacted by something beyond our control. The farmer needs a fixed income coming to him which instead of being given as loan waivers could be planned through the right mix of crops and irrigation technology support. This is also doubly necessary as farm loan waivers will be soon seen as a norm rather than an exception and the distribution of wealth in this manner can never be fair. In fact farmers will no longer be incentivised to grow crops when cash is so easily available and the impact on inflation, food security and our deficits will set us back by years.

Which brings me to what does the common man want? India is not a single homogenous entity. The differences in purchase from urban to rural and state to state are well documented. What doesn't get documented is increasing consumerism and that's where Indian youth want to be more upmarket, more equal

• Inclusive sustainable growth & development and healthcare

Whenever someone gives me numbers on xyz growth in this sector, I am glad for them though the fact that is often missed is inclusive and sustainable growth and development. Years back an Indian could stay completely uninformed about the fact that his fellow citizen is living in a certain manner and enjoying certain things, that's no longer the case. Every Indian now want's to see growth and development and want's to be part of the story and that is a big challenge India still faces.

Every action taken by the government needs to think mass inclusive sustainable growth. Services as a growth engine worked because of the gap we faced in demand and therefore the increased supply but the moment we cannot show tangible growth to a farmer, he will be affected. The farmer does understand that a poor rain can cause damage but he rightfully no longer wants to take the entire risk of the enterprise. It is no longer the joy in tilling the land which will keep him happy. He needs it to provide money to live a comfortable life and make a profit for his son to continue with it.

The youth of today are pragmatic to leave an occupation that doesn't pay and also impulsive enough to ditch a government that doesn't show them tangible growth quickly. While that may be a worry for us, considering the rate at which some developed countries are changing PMs, it may become a norm once feedback systems become more robust.

And lastly there is healthcare. India still has millions of people with very little access to healthcare. A growing population will need more beds and doctors and facilities and most importantly they will need a healthcare which they can afford. While the health insurance model gets lobbed around as a panacea for all issues, fact is health insurance cannot work in a country with our kind of low GDP per capita. Insurances are not designed to provide free health care and have limits on advanced diseases which is a problem but the bigger problem is a lack of health facilities to use the insurance. India will need to foot the bill of it's citizens at least in the short term otherwise that will be a major issue in the future and some day some government will end up paying for health expenses at private hospitals because the system did not plan for healthcare.

- In conclusion

As an FMCG marketeer, my thought process is more grounded and a little altruistic because at the end of the day, I cannot succeed unless each and every person has money to spend. This money get's generated after he/she has taken care of the family needs and then wants to either experience or consume something beyond the basics and for that very reason we need the consumer to have lesser issues in his head. Lesser worries about crop issues, health issues means a greater appetite to experience something new and also invest in growth rather than saving for the rainy day. Truth be told, every time a farm loan waiver happens, consumption goes up and some marketeer must be meeting his targets but at the end of the day, money entering the system like this will impact inflation and again impact the spending power of the common man.

We are in the enviable position of having the highest percentage of our population in the right age bracket to work and that is where we need to plot a path completely divergent to developed countries and even China who are taking steps to care for an ageing population. Our next leap needs labour intensive industry and good agriculture planning otherwise potentially what seems to be our greatest strength could actually be our biggest issue. Unemployment will always have a bigger negative impact than any growth in non labour intensive sectors. The theme of India needs to be inclusive sustainable growth, employment and healthcare.

A billion plus people are counting on us doing the right thing today.

-Pranay Rao