Amitabh Kant, CEO, NITI Aayog, VK Sharma, Chairman, LIC, Harsh Mariwala, Chairman, Marico, Rajesh Gopinathan, CEO & MD, TCS in conversation with Nikunj Dalmis of ET Now at the India Economy Conclave in Mumbai on Thusrday.
How can Indian economy grow to be a $5-triillion economy?
Amitabh Kant: When we started ranking our states, in the first year Gujarat came first. The very next year Andhra beat Gujarat and in the third year, Telangana beat Andhra and Gujarat. The good thing was that the mineral rich states of Jharkhand and Chhattisgarh did extremely well. They came fourth and fifth and my believe is that if eastern parts of India starts doing well,India will do extremely well in the long run. But there have been a series of structural reforms which will make Indian economy very efficient.
The goods and services tax, the RERA which is a very major reform which people do not realise now and the Insolvency and Bankruptcy Code are very major structural reforms which India was crying out for the last several years. These have been carried out and in the long run, this will make Indian economy extremely efficient. The challenge really is that if you want to grow at high rates of 9% to 10% over a three-decade period, year after year, you need to do two things.
No country in the world has grown without exports. Japan Korea, China all have grown on the back of exports. You need to push for exports and that would require size and scale of manufacturing and penetrating global markets.
Secondly, we need hundred champion companies like TCS and the government needs to back them. Nowhere in the world have countries grown big without private sector champions. Look at Korea, look at Japan. All of them have champion companies and therefore we need to work in partnership with private sector companies to create hundred TCSes which will penetrate global markets. Till that penetration of global markets is made through the large companies, it will be very difficult to grow at 9% to 10% over a long period of time.
In a growing economy, the need for safety and care is very important. Sir your sector has seen the maximum disruption. LIC was riding on brand and distribution. Where do you think the industry is headed?
VK Sharma: You are diverting. I was thinking that you will ask me that whether LIC will go global.
Are you planning to go public also? Are you planning to go global?
That is not the point here. From 1960 onwards, the insurance sector has been ahead of the curve as far as the GDP of the country is concerned. The insurance sector has roughly grown 1% to 2% above the GDP growth. Today also that is the scenario. The insurance sector has a double digit growth rate. It has an asset base of Rs 33 lakh crore, starting from a base of a few thousand crores.
I feel that in services sector, the insurance industry can play the drivers role. We have grown from 1% of the GDP to roughly about 2% plus of GDP in terms of the total both life and general. We have certainly been left behind. If we see the potential and the performance, we have to catch up very fast. Even if insurance industry grows by double digit like 15% plus, within five years we will be able to add up more than 1% in GDP. That is one part.
The second part is that if we have to truly become a partner in the $5-trillion economy, the insurance industry has to go global. I take pride that our general insurance, reinsurance is 10th largest company in the world. Our international business base is roughly about $4 to $5 billion in dollar terms. Slowly we have spread in 14 countries. Very few people know that as early as the 60s, we had invested in Kenya, Mauritius and Fiji.
So given opportunity, insurance sector has the capacity to grow. In Nepal, we are the second largest company. In Bangladesh, we have started. Everywhere there is potential and we can expand and we can earn for the country. Also, our knowledge, our technology base, our skill base itself is an item of export. Insurance, technology and others we can export to other countries and we can earn out of it.
The Indian romance is centred around consumption. But Indian per capita consumption is still below $2000, much below other $2 economies. When do you think our per capita income will hit that J-curve beyond which it will start only growing?
Harsh Mariwala: It is a question of economic growth and the growth has to cover all sections of the society. In the last few years, we have seen much more growth at the upper end in terms of the rich people. As the economy grows, I am quite sure it will filter down all the way to the lower levels and then only the per capita consumption can go up.
It is very important that growth is wide-based, otherwise it can lead to a revolution. If the rich becomes richer and the poor do not improve the standard of living. then that raises a question mark against the hole consumption story.
It is very important that the growth is filtering down all the way to the bottom at the village level. Whatever initiatives the government is doing in terms of infrastructure improvement. Mr Gadkari is here and he has done a fantastic job in this area — whether it is waterways or ports or roads.
All these are going to improve rural linkages. There is also another, we have been reading that the rural economy is in distress. Overall, if you look at the FMCG industry, the rural growth is higher than the urban growth. So maybe, the service economy in the rural is better off; maybe there are certain parts in some states where the monsoon has not been good and the farmers have been distressed but overall the rural is not as bad as one is making out to be, at least from our end.
When we do business, we are seeing higher growth rates in rural India which is a good sign and we want rural to grow because that is where the most of the Indian population is. It is very important to broad-base the growth at different levels of income.
I am sure the poor will become middle class, middle will become rich but there has to be higher delta in increase of incomes at lower ends which is very crucial for our economy to become much larger economy, a more stable economy, a more robust economy.
The IT sector has played a very large role in Indias GDP growth. Do you think the robust model of the Indian IT sector is here to stay? Given the transition in technology, could there be a challenge to job growth?
Rajesh Gopinathan: We have now inserted ourselves as a global force in the global technology arena. And while the nature of technology is that it will keep on changing as long as we remain disciplined, we should do well.