Indian Economy Status , Outlook and Challenges

1. 3rd
Millennium – Opportunities, Issues and Challenges
R.Kannan , Hinduja Group
International Research Conference conducted by Indian Accounting Association, University of
Mumbai and Chadrabhan Sharma College on 7th
April 2018 .
Hon’ble Member of Parliament, Shri Dr. Kirit Somaiyaji, Prof.Shiware, Prof Chitra Natarajan, Prof.
Ashok Joshi, Prof. Madhu Nair, Prof Pratima Singh, Members of Indian Accounting Association,
Faculty Members and Researchers from all over the world , Ladies and Gentlemen, Good morning to
all of you.
I am very happy to be part of the 4th
International Multi-Disciplinary Conference on Transition and
the Transformation in 3rd
millennium. I would like to thank Prof.Shiware and Prof.Chitra for inviting
me to deliver the key note address.
I am happy to know that in this conference, research papers relating to:
i) Strategic Marketing and Planning
ii) Business Ethics
iii) CSR
iv) Global Management
v) HRM
vi) Digital Strategies
vii) Innovation
viii) Empowering Women
ix) Telecommunication, etc
Will be presented. It is very heartening to note that more than 400 research papers were received
from various parts of the world and am happy to see , many dignitaries have come from abroad to
attend this conference.
Am sure with these wide variety of subjects and perspectives, the participants including me will
benefit a lot from the proceedings. The topic today is of utmost relevance in the context of
continued disruptions and uncertainty in the Economy.
The advancements in the first 17 years of the 3rd millennium are breath taking. We are living in an
age where continued disruption, uncertainty, volatility, complexity and ambiguity are part of our
daily life. The advancement in recent past is much larger than the advancement witnessed in the
earlier few thousand years in the past.

2. Few hundred years ago China and India were the leading economics in the world. According to some
sources, both countries had more than 50% of the world’s GDP.
Later when Britain started expanding its operations globally, it became the leading economy in the
world. Technology revolution catapulted USA to the leading position in the world. Afterwards, we
witnessed the rise of Europe, Russia, Japan and South Korea.
From 1980 onwards, China started growing fast and India started reporting higher growth after
liberalisation. Then we started hearing Acronyms like BRICS, MENA, CIVET, etc. In 1980 , China and
India were of the same size . The breath taking reforms undertaken by China and the fast growth it
was able to sustain for many years have made China , a global power today.
US and Europe and countries like Japan, Singapore and Hong Kong were contributing to the growth a
few years ago. Even today, because of its large size, US contribution to the Incremental economic
growth in the world is substantial. Since the growth potential in these countries have become less,
the countries like China, India, Indonesia, Middle East and Arica have started growing fast.
According to predictions for 2050 by various experts, China will be the leading economy with a GDP
of about $ 50 trillion, followed by US at $ 36 to 40 trn and India $ 27 to 30 trn. Indonesia will be the
fourth largest economy in the world.
In the next 2/3 years, India will become the country with the maximum population in the world. It
has the largest number of youth in the world. The largest number of entrepreneurs in the world are
living in India. We create the maximum number of entrepreneurs in a year in the world.
As per the forecast by all the leading financial institutions and Economists through out world, India
will continue to grow at a rate of more than 7% p.a. for many more years. The high growth will
create many opportunities for people from across the society. The path to the growth is paved with
lot of challenges.
Indian society had gone through a fast transformation in the last few years. From total dependence
on Agriculture and rural areas, the growth has shifted to services, manufacturing and cities. Despite,
the level of urbanisation is only at 32%, what we find today is that lot of developments taking place
in villages also. They are being provided with electricity, water, road connectivity, media and digital
connectivity. The penetration of mobile phones in rural areas is taking information to every nook
and corner of the country. The concept of joint family is giving way to nuclear families. In a family,
many go to work, resulting in multiple income and high earning capacity. People have started
spending money and India has become one of the high consumption economies in the world today.

3. The entry of e-commerce players has increased the consumption level. Unlike in the past, today
people spend lot of money on Education, Health , Leisure, Entertainment and Travel.
In an Economic Growth model, the growth of an economy is initially dominated by Agriculture and
then manufacturing picks up. Finally, the services takes the dominant position. In the case of India,
even without creating a big manufacturing base, the initial fast growth was supported by services. As
the services grew, it gained its share from Agriculture in proportion to the lost share of Agriculture.
Whereas the share of industry and manufacturing remained at the same level for many years.
The fast growth in services was mainly supported by Trade. India has got one of the largest and
deepest Retail systems in the world. There are six levels of trade before it reaches the final
customer. At the retail level itself there are more than 15 million establishments. If we take the
other six levels, it adds up to a lot in terms of number of entrepreneurs. This has created lot of
business and entrepreneurial opportunities in India. Most of the jobs in India are created in the
unorgainsed sector and too in the area of trade. At the global level, India becoming the leading
country in the world for IT outsourcing , has created many businesses in the area of services. An
entire eco system of businesses has been created around IT and ITES.
Whereas China’s growth strategy was anchored on manufacturing. With the low cost of all factors of
production, China was able to become the manufacturing hub for the world. Now China wants to
build its service sector and aspires to compete with India , in services.
If India has to grow at more than 7% p.a and the fast growth has to be sustained, manufacturing has
to be developed. The share of manufacturing in our economy is only 16% and the Government has
formulated a programme“Make in India” to increase the share of manufacturing share to 25% of
GDP. 25 thrust sectors have been identified for increasing the share of manufacturing in GDP.
To achieve this objective lot of skills are required. When there is availability of lot of people for work,
there is also a big demand for specific skills to develop industries. Realising this need, Government
has created a Skill development programme to fill the gaps in the skills required. Skill development
programmes are in place at the National, Regional, Local levels and the target is to train 500mn
people in the next few years in more than 43 fields.
To develop manufacturing, a conducive eco system needs to be developed. To address this issue
,National level Industrial corridors spanning across many states and industrial corridors within the
states were identified and in the process of implementation. These initiatives will help to develop
the industrial clusters and infrastructure required for industrial development. This will go a long way
in accelerating the growth of manufacturing and the economy.

4. Countries across the world have recognised the importance of fast economic growth. The ruling
parties/rulers across the world , irrespective of the form of government , drawn up ambitious plans
for the growth of their economies. They conduct road shows to attract investments into their
countries.
Political climate across the world is becoming business friendly and the culture has changed. Earlier ,
investors used to visit the government offices to obtain permits. Now, the Government authorities ,
visit , various countries in the world and inviting the investors to invest.
In India every state Government has a plan to grow fast and each state conducts Road
Shows/Investment meets to attract investments in the state. This will go a long way in increasing the
competitiveness of states and formulation of robust economic growth strategies.
Digitisation and Technology. The latest development in technology has created a lot of opportunities
for growth but at the same time has destroyed several industries. The fast penetration of mobile
technology has advanced the social/financial inclusion and today even a person living in a rural area
can use a smart phone to read and receive a high quality content which is of global standard. The
advancements in AI, IOT, VR and block chain are going to improve the productivity several times.
At the same time, faster adoption of these technologies will destroy many jobs. Further , misuse of
these technologies is threatening the privacy of individuals. The exploitation and profiteering is also
a big threat. Cyber security has become one of the major areas of concern. The adoption of these
technologies should be handled with great care and measured approach to adopting these
technologies will ensure a balanced Economic Growth .
To ensure a balanced development of any industry and an economy, regulation and regulatory
agencies play a major role. As the world becomes more and more complex, new regulations have to
be formulated and new regulatory authorities have to be created. The time taken and procedures to
be adopted to adhere to regulations results in significant costs for an enterprise. Regulatory costs
have become one of the major costs of doing business today.
The adoption of new technologies / manufacturing techniques has resulted in degradation of the
environment. Higher level of manufacturing will result in higher pollution. Now that , we have set a
higher target for manufacturing, there is always a dilemma, which one should be given precedence
over the other.
The opportunities before us are accompanied by several challenges. Considering India has a large
population, all our future economic strategies should be based on use of the available manpower.
Considering the large number of work force, even a small improvement in productivity in India will

5. lead to big gain. This is the moment for India. We have very good economic development
programmes in India. By formulating workable implementation plans and effective implementation,
India can regain the global leadership in the third millennium. To realise this dream, all the stake
holders in the society should work together and Make India a leading force in the world.
Thank you.