TRANSFORMATION IN ECONOMIC GROWTH MODEL

Transition from Consumption led growth to Investment-led growth:

China’s development model from 1980’s was led by investments by Government in infrastructure. It created capacities, which created employment opportunities. On the other hand, the Indian development model was one based on consumption.

The proposed big-ticket investment in infrastructure creation in railways, waterways, airports & gas supply of Rs. 1 lakh crores (or even 50% of it) will create large-scale employment opportunities. It will spur growth in the economy.

On the same token, we can perceive a clear slowdown in discretionary consumption, which was driving the economy upwards.

These could be early indicators that India could be transforming from a completely consumption-led economic model to an investment-led economic development model. The unheard voice of the economy has to be heard!

Government expenditure should drive this transition. Now, infrastructure investment constitutes more than 12% of budgetary spend!

Welcome India 2.0!

       i.   A faulty adoption of the Investment-led Economic Model could be counter-productive

Below is the formula, Chinese adopted for achieving great success in turbo-charging their economy for 10% growth rate for 2 consecutive decades:

Ø Envision lofty long-term goals.

Ø Plan meticulously for medium term.

Ø Execute diligently to accomplish short-term goals. 

• Budget 2019 got it right for the first one - “Envision lofty long-term goals”. But they fell short on providing an execution roadmap.