Why Modi govt's goal of 9-10% GDP growth in 2022-23 may remain a pipe dream

One of the features of the Modi government is its willingness to set ambitious targets for various programmes, and then to make a determined effort to achieve the goals set. Such ambition is amply in evidence in the document that Niti Aayog has released, called “Strategy for New India @ 75”. By definition, anything that hopes to create a “New India” in less than four years (ie by Independence Day in 2022) should invite skepticism. Still, the details are worth exploring. The over-arching objective is to deliver 9-10 per cent GDP growth in 2022-23. To get there, a number of sub-targets are laid out. How realistic are these? To find out, sample some of what is laid out (comments are in italics):

Double the rate of manufacturing growth, from 7.7 per cent.

Accelerate the growth of the mining sector from 3 per cent in 2017-18 to 14 per cent, with an average growth of 8.5 per cent during 2018-23.

Provide irrigation to all farms.

Expand airport capacity more than five times, to handle one billion trips a year.

Double government spending on education to 6 per cent of GDP. (This is a hoary chestnut.)

Increase the proportion of formally skilled labour from the current 5.4 per cent of the work force to at least 15 per cent (This translates to about 10 million workers being skilled every year).

Raise the tax-GDP ratio from the 16-17 per cent range over the last several years to 22 per cent.

Increase public investment from 4 per cent to 7 per cent of GDP (Question: While farm loan waivers proliferate?)

Increase India’s share in global international tourist arrivals from 1.18 per cent to 3 per cent. But (in seeming contradiction), increase the number of foreign tourist arrivals from 8.8 million to only 12 million.

Double the length of national highways to 2 lakh km by 2022-23 from the existing 1.22 lakh km. (Actually, that increase would be 64 per cent, and would involve building 60 km of national highways every day, over and above the construction of state highways and other roads.)

Reduce the number of road accidents and fatalities by 50 per cent by 2020, while also achieving zero fatalities on the railways.

Achieve 100 per cent electrification of broad gauge track, from 40 per cent in 2016-17.

Take R&D expenditure from 0.7 per cent to 2 per cent of GDP.

For mining, double the area explored from 10 per cent of obvious geological potential (OGP) area to 20 per cent.

Reduce the turnaround time at major ports from about 3.44 days (2016-17) to the global average of 1-2 days. Also, reduce border compliance time to 24 hours for exports and to 48 hours for imports by 2020.

Deliver all government services at the state, district, and gram panchayat level digitally by 2022-23, thereby eliminating the digital divide.

Separately from these physical targets, there is a whole range of policy prescriptions in every sector. It is not clear whether these are merely exhortations, in the style of the annual Economic Surveys and the old five-year Plans, or required to achieve the stated targets. Still, here are some of the policy prescriptions:

Put in place an economy that is predominantly formal.

Exit central public sector enterprises (CPSEs) that are not strategic in nature…For larger CPSEs, the goal should be to create widely-held companies by offloading stake to the public to create entities where no single promoter (including the government?) has control.

Privatise state power distribution utilities

Rationalise power tariffs to ensure global competitiveness of Indian industries. (That means high industrial power tariffs will no longer subsidise agricultural and domestic powers users?)

Revisit rail tariffs, to make the passenger and freight segments sustainable. Freight tariffs should be competitive with the cost of road transportation. (Sustainability may conflict with competitiveness.)

Abolish the Essential Commodities Act.

Some years ago, when Atal Bihari Vajpayee as Prime Minister was presented by McKinsey with a similarly ambitious set of goals, his pithy response was: Yeh sab kaise hoga? (How will all this happen?). The old Scottish saying was ruder: If wishes were horses, beggars would ride.

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