Jose Thomas

My Blog


SUSTAINABLE GROWTH
Tuesday 06th July, 2010



     

 

Leave a Reply   Back to blog

In this post you will observe that I am shifting focus to a completely different subject.

These are some of my thoughts and concerns regarding India’s future.

As we all know, India is today, moving towards the top gear from an economic stand point, but we all have to understand that growth must be sustainable.

See what has happened on the global scenario. Major economies – the U.S., Europe and Japan have stumbled. Few years ago the world was in great form, but it all collapsed quickly due to
non-sustainable growth policies. Greed, which capitalism takes pride in driving, does not help. Greed can lead to un-sustainable practices, which have always proven to be dangerous and with disastrous consequences. India and China are over dependent on America and Europe for their exports and the western world is dependent on India and China for virtually everything they need.

Recently, while at a hotel in Chennai, I noticed the toilet soaps were imported from China. Look at the imports – goods and merchandise from China. We continue to import products such as auto parts, electronics, construction material, furniture and so on. Is India incapable of manufacturing these goods, considering our latent pool of talent, innovation, resources and people? The question is- do we have the will and the policies? Self reliance and global sourcing are potentially conflicting. If, for instance, India earns more by producing software as opposed to producing soap, it is natural that the economy gravitates towards software.

China & few other Asian countries have led the west to think that low cost goods cannot be manufactured in a developed nation. Manufacturing cost in Europe and the U.S. is much higher than the selling price of these Chinese manufacturers. This is economics at work and I don’t see a problem with this. Low cost countries or LCCs are a reality that the world has to accept. The larger problem here is the western world’s obsession with ‘consumption driven economics’.

Due to more and more money being pumped into the system, over a period of time the cost effectiveness due to cheap labor will no longer be available resulting in the steep rise in cost of production. The labour cost in India and China are already on an upward spiral. A fresher, just out of college today, in India is expecting to earn $15,000 to $20,000 a year. If you interview an MBA Finance or Chartered Accountant with a minimum of 5 years of experience, the asking price is around $100,000 per annum. I believe these asking prices are non-sustainable and if companies in India are hiring at these rates, it will certainly have an impact on our cost of manufacturing. If this scenario goes unchecked, with natural resources being available in countries like USA, they will shift production back to their home ground. The biggest challenge for LCC’s like India and China is the ability to innovate and thereby ensure that they continue to enjoy the benefits of cost arbitrage.

Small and mid size organisations are must for a healthy economy. These are the companies that pay local taxes and do not have any shields or hideouts where they can hide their money. They operate locally and generate opportunities at the grass root level. These are the companies that need to stay competitive and become the back bone of developing countries like India. The Government must go all out and support small and medium enterprises (SME’s) by providing incentives, sops and policies to SME’s, which will in turn generate a huge amount of employment as well. Today, new generation start-up companies and entrepreneurs have innovative ideas but are unable to convert them into reality due to various constraints. (I will write later on the major constraints that India faces).
Banks and financial institutions should have a different set of norms for lending to SME’s. In this way, focus will remain on sustainability with innovation being the driving factor.

Growth if not balanced will be unsustainable.

Back to blog Top
Responses to
 Sinjini says:
very true sir- the current senario has made the youth think of money first and then the experience. hopping jobs every year is like a trend now.there are many ppl who stick on to 1 company for long. it is dangerous...
 
 Johnson John says:
Sir, incidentally I came to this site, thru a link posted in my Facebook page .... I have read all four blogs you have written ... Very inspirational, I was just thinking How can I materialize the experiences I am going thru these blogs in my life ... I am also an utter failure by my mind, as there are a lot of ideas which I never ventured in my life .... May be I will inspire from you and fulfill my dream .... Your writing style is just awesome ... IF all true experiences of your life .... May the Good God Bless you in abundance ....