India needs disruptive policies and fundamentally different solutions to help meet future challenges, Mukesh Ambani, the country’s richest man, told a group of industrialists.
“Mere policy reforms to incrementally affect the status quo will be meaningless,” Ambani, 53, said in a speech in New Delhi yesterday. “We will need disruptive policies, like the one which changed the future of India in 1991. The disruptive policy that allowed India to compete with the rest of the world.”
India’s economy has grown nearly six times since 1991, when then finance minister Manmohan Singh introduced free-market measures that cut red tape, removed capacity caps on steel and cement makers and allowed overseas companies including Ford Motor Co. to set up operations locally. Finance Minister Pranab Mukherjee’s budget on Feb. 28, refrained from spelling out a timeframe to ease investment rules for overseas insurance and retail companies.
Since 2004, Prime Minister Manmohan Singh has presided over an annual average economic expansion of about 8.5 percent, the fastest pace in the country’s history since independence in 1947. The growth was accompanied by inflation as demand for Infrastructure, including roads and ports, outstripped supply.
India’s $1.3 trillion economy expanded 8.2 percent last quarter, making it the fastest-growing major economy after China. The finance ministry predicts GDP may grow as much as 9.25 percent in the year starting April 1.
Even so, foreign direct investment in India is headed for the first drop since the year ending March 2003, hindering a bid to match China’s $5.88 trillion economy, which expanded 9.8 percent last quarter.
India needs to create 15 million jobs annually for the next 10 years, said Ambani, who is chairman of Reliance Industries Ltd., the country’s biggest company by market value. Most of the new jobs would have to come from industrialization, creating infrastructure and rejuvenating agriculture, he said.
“In the next 10 years, there is an opportunity to add $500 billion year on year” in agriculture, Ambani said. “India has to transform its agriculture into a productive enterprise to propel itself into becoming a global economic power.”
Ambani called for radical reforms in health and education. The South Asian nation needs to increase health spending at least five times from the current level of 1 percent of gross domestic product to keep the youth healthy, Ambani said.
“The accent cannot be limited to sustaining the diseases of the affluent and managing the old,” Ambani said. “Our demographic dividend, the youth and the young, are largely unprotected and uncared for.”
India has “grossly underperformed” in expanding access and improving the quality of education, Ambani said.
Mukherjee lowered incomes taxes, increased wages and boosted spending on the “social sector,” which includes health and education, to protect citizens from spiraling prices. The minister increased social spending by 17 percent for the financial year starting April 1.
Ambani was ranked by Forbes India as the nation’s richest person with $27 billion of wealth. Reliance Industries has investments in energy exploration, refining, chemicals and retailing.
Ambani told shareholders in November 2009 that Reliance would make efforts to improve the quality of lives in rural India through endeavors in education, health, natural resource management and community development.
India has the potential to become the world’s largest economy by 2050, though growth is constrained by dilapidated infrastructure and a “hostile attitude” toward foreign direct investment, Citigroup Inc. said last month.
Foreign direct investment into India fell 24 percent to $19 billion in the eight months ended November, compared with the same period a year earlier, according to government data.
Nouriel Roubini, the New York University professor and chairman of Roubini Global Economics who predicted the global financial crisis, said in December India’s economy may expand more than China’s in the next 10 years if the second-most populous nation lifts curbs on foreign investment in retail and boosts spending on roads and bridges.
More than four years after Wal-Mart Stores Inc. formed a venture with Indian billionaire Sunil Mittal, the world’s biggest retailer is barred from selling directly to the nation’s 1.2 billion people. Legislation to allow insurers including New York Life Insurance Co. to increase investment has been languishing for at least seven years.