Government efficiency will be a key factor for India to become a developed nation, said Union Finance Secretary TV Somanathan. .
To become a developed nation, India’s per capita income needs to touch $13,000 from the current levels of around $2,000. To achieve this, the economy has to grow at 7-7.5 per cent for the next 25 years, he said on Saturday, delivering the G Ramachandran Endowment Lecture at Madras School of Economics on ‘Development in Changing Times: Role of Government Efficiency’.
But he dismissed notions that India needs to have a more rapid pace of growth similar to that of countries like Japan, China and other East Asian nations when they took off. He pointed out that countries have become developed economies historically with a growth of less than 6 per cent. He also said that no particular demographic profile is needed to become a developed nation. He pointed out that some countries grew even when they had a high death rate.
Hurdles ahead
Somanathan also highlighted how the ground situation has changed over the years. China, he said, was able to grow rapidly in an era of rapid liberalisation of international trade, high level of investments, reduction in international conflicts, low interest rates and young population across the world. In the next 25 years, restrictions to global trade will increase, on-shoring or friendly-shoring of supply chain will happen, conflicts will increase among nations, climate change will become a major factor, interest rates will rise and young population will be restricted to just India and sub-Saharan Africa. Under these circumstances, India needs to find its own way of growth to become a developed economy.
He highlighted four measures that can be adopted to improve efficiency in the government. First, government should delegate decision making.
Secondly, there is a need to improve the level of supervision. Third, changing rules to change behaviour. Lastly, he called for continuous high quality training for building capacity among bureaucracy.
Former RBI Governor and Chairman of Madras School of Economics, C Rangarajan, agreed with Somanathan about focusing on investments and efficiency in deploying them. “We need to run fast. Even faster,” he said.