Top 10 things India needs to achieve its potential

Goldman Sachs Economic Research division has released an excellent paper listing down 10 most crucial reforms that India needs to concentrate on to achieve its 2050 potential. The paper has been written by Jim O’Neill and Tushar Paddar of Goldman Sachs.

If India can carry out certain reforms, it can grow more than 40 times bigger by 2050.

Here are the list of Top 10 Things for India to Achieve its 2050 Potential according to Goldman Sachs:

Improve governance.

Without better governance, delivery systems and effective implementation, India will find it difficult to educate its citizens, build its infrastructure, increase agricultural productivity and ensure that the fruits of economic growth are well established.

Raise educational achievement.

Among more micro factors, raising India’s educational achievement is a major requirement to help achieve the nation’s potential. According to our basic indicators, a vast number of India’s young people receive no (or only the most basic) education. A major effort to boost basic education is needed. A number of initiatives, such as a continued expansion of Pratham and the introduction of Teach First, for example, should be pursued.

Increase quality and quantity of universities.

At the other end of the spectrum, India should also have a more defined plan to raise the number
and the quality of top universities.

Control inflation.

Although India has not suffered particularly from dramatic inflation, it is currently experiencing a rise in inflation similar to
that seen in a number of emerging economies. We think a formal adoption of Inflation Targeting would be a very sensible move to help India persuade its huge population of the (permanent) benefits of price stability.

Introduce a credible fiscal policy.

We also believe that India should introduce a more credible medium-term plan for fiscal policy. Targeting low and stable inflation is not easy if fiscal policy is poorly maintained. We think it would be helpful to develop some ‘rules’ for spending over cycles.

Liberalize financial markets.

To improve further the macro variables within the GES framework, we believe further liberalization of Indian financial markets is necessary.

Increase trade with neighbors.

In terms of international trade, India continues to be much less ‘open’ than many of its other large emerging nation colleagues, especially China. Given the significant number of nations with large populations on its borders, we would recommend that India target a major increase in trade with China, Pakistan and Bangladesh.

Increase agricultural productivity.

Agriculture, especially in these times of rising prices, should be a great opportunity for India. Better specific and defined plans for increasing productivity in agriculture are essential, and could allow India to benefit from the BRIC-related global thirst for better quality food.

Improve infrastructure.

Focus on infrastructure in India is legendary, and tales of woe abound. Improvements are taking place, as any foreign
business visitor will be aware, but the need for more is paramount. Without such improvement, development will be limited.

Improve Environmental Quality.

The final area where greater reforms are needed is the environment. Achieving greater energy efficiencies and
boosting the cleanliness of energy and water usage would increase the likelihood of a sustainable stronger growth path for India.

I highly advice you to read the full white paper published by Goldman Sachs.