Oct-Dec 2011

Sustainable Growth: A pipe dream?

The Indian School of Business (ISB) hosted the World Economic Forum (WEF) Young Global Leaders South Asia Meet recently. The two-day event was graced by distinguished personalities including Siddhartha Lal, Managing Director and CEO, Eicher Motors Limited, Ajit Mohan, Ex-Team Lead and Co-Author, McKinsey Urbanization Report, Srini Raju, Chairman of the Board, Sri City, Alok Kshirsagar, Director and Senior Partner, McKinsey & Company and Tanya Dubash, Executive Director and President (Marketing), Godrej Industries Limited, who debated on issues spanning from urbanisation and public policy, to economics of the poor.

The steep pace of urban migration is a concern for India. About 500 million people are expected to migrate to cities in the next three to four decades but the current infrastructure is inadequate to sustain this surge. According to Siddhartha Lal, the root cause for urban migration is the search for better opportunities. However, restricted access to basic amenities such as public transport prevents most people form participating in the transformation of the country.

To cope with these problems, the government policy, previously, was to stem urbanisation. However, this has changed. It is now widely accepted that urbanisation aids economic growth, which in turn, improves the net income of citizens. To ensure that India’s urban explosion is sustainable, the government needs to build frameworks for the next 30 to 40 years. “They need to think long-term rather than short-term, and have this fundamental thought embedded while deciding on the frameworks,” opined Ajit Mohan.

There are several hurdles in the path towards urbanisation in India. First, there are inordinate delays in obtaining the relevant permissions to start building new cities, especially with regard to land acquisitions. As a result of this, “new cities are almost dead,” said Srini Raju. Second, is the lack of availability of long-term funds. “The government has to provide mechanisms for long-term loans with tenures up to 20 years,” added Raju.

The panelists also spoke about accountability and transparency in the public sector. This can be achieved by allowing public sector employees to continue in their roles so that they can specialise in their respective areas. Currently, there is a lack of accountability because employees are rotated internally or transferred before they can see their work to fruition. “There is a need to identify individuals who are truly making a difference and to understand their constraints,” articulated Alok Kshirsagar.

India is set to grow but in order to accelerate this timeline of change and ensure that it is sustainable, it is important to understand the problems of the current institutions and work on fixing them rather than creating new institutions.

“We will grow but we need to evaluate the opportunities of not carrying out the reforms,” was an apt summation by Tanya Dubash.

Hemchandra Kurra, PGP Class of 2012, was a key contributor for this report for ISBInsight.

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