If there is one wish I would like to make for 2023, it is for shared peace and prosperity for all.All efforts to propel economic growth are for the prosperity of people. But GDP growth rates, the absolute size of GDP, and even per capita income, do not fully capture the prosperity of the masses. Increasing inequalities are a reality in India and most developing nations. Simon Kuznets told us decades back that it is going to happen as economies open up and growth accelerates, before it stabilises and even declines as those left behind start catching up. But how do they catch up with the front runners? It can happen only when one invests heavily in their skills, education, access to finance (capital/technology) and innovative models of development that dovetail inclusiveness with faster growth plans.In 2022, India has registered the highest growth rate amongst all G20 countries and it is likely to do so even in 2023. That’s a matter of pride. And within India, when we talk about growth and wealth creation, one name stands out — Gautam Adani. In a recent interview with India Today, he revealed that his rise started with the liberalisation of economic policies during Rajiv Gandhi’s time, and got momentum with the 1991 reforms. But the year 2022 has seen the most explosive growth with his net worth rising to about $125.8 billion (as per the Forbes list on December 28, 2022) making him the richest man in Asia and third-richest in the world.Many critics say this is all due to his proximity to Prime Minister Narendra Modi. But then, why is the Chief Minister of Rajasthan hosting him as he announced plans to invest about Rs 65,000 crore in setting up a mega solar power plant of 10,000 MW, expanding a cement plant, and upgrading the Jaipur airport? Similarly, why did the Tamil Nadu government support him in setting up one of the largest solar power plants at Kamuthi? Even the West Bengal government has been wooing him for investment and the upgradation of its ports. The reality is that most of the top business houses work with all governments so long as it makes economic sense to them. Be it Adani, Reliance, Tatas, Wipro, and others — they all create wealth and millions of well-paid jobs. That’s their contribution to society. But they also give back to society through their CSR activities as well as through family foundations and trusts.A few years back, Azim Premji pledged to give away about half of his wealth to the society through Azim Premji Foundation. He topped the EdelGive Hurun India Philanthropy List in 2020. How many people are aware that Gautam Adani’s foundation is committing Rs 60,000 crore to give back to society through promoting better health, education, and skill development? This, said Adani, was the best gift on his 60th birthday.While all this is commendable, I feel there could also be an alternative model for shared prosperity. And that is making the less privileged partners in the journey of wealth creation. Let me elaborate. Since Gautam Adani is committing Rs 60,000 crore through the Adani Foundation to give back to society, here is a small idea that can make millions prosperous, if he takes it up as a priority.The largest share of India’s working population is engaged in agriculture (about 46 per cent). Their education levels are low and the average holding size is small (1.08 ha). The average household income hovers below Rs 20,000 per month at current prices. Of course, many marginal farmers earn even less than this. This is not enough to provide a sustainable demand base for a manufacturing revolution in India. Educating these people at a large scale or even creating new skills may be a long-drawn process. So, here is an idea that can augment their incomes substantially and quickly.Adani aims to be the largest player in green energy, especially solar. Solar farms today need a lot of land that is degraded. But land is scarce in India and I am not sure how far this model can be scaled up. The alternative is to have solar as a third crop on farmers’ fields. The designing of solar panels and structures has to be done in a manner that allows enough sunlight to come through for photosynthesis of crops below. Farmers can keep growing two crops below these solar trees that are about four meters high. The investment in solar panels will be done largely by entrepreneurs (say Adani Green Energy) with some equity participation by the farmers (say 10 to 15 per cent). Farmers will maintain these solar trees regularly. Power will be generated throughout the year and it can be fed to the grid at an agreed price. The farmer will get rent for his land and a share in the profits of power generation.This idea is being tried in a number of countries, including India. Our research in this area led to the setting up of a pilot in Ujwa KVK in the Najafgarh area in Delhi with the help of former Lt Governor of Delhi, Anil Baijal. Just two kilometres from the site of the pilot project, an entrepreneur, Surinder Ahuja (CEO, SUNMASTER), has tried out this idea on four acres and he is offering Rs 1.25 lakh per acre/year to farmers for using their land for solar and agriculture activities. This doubles farmers’ income within six months.The question is whether Adani can scale it a million times and create a revolution with farmers generating solar power along with food crops. Only then can the farmer become not only anna daata but also urja daata (giver of food as well as solar energy). This will be a true shared prosperity model.Gulati is Distinguished Professor at ICRIER. Views are personal
If there is one wish I would like to make for 2023, it is for shared peace and prosperity for all.All efforts to propel economic growth are for the prosperity of people. But GDP growth rates, the absolute size of GDP, and even per capita income, do not fully capture the prosperity of the masses. Increasing inequalities are a reality in India and most developing nations. Simon Kuznets told us decades back that it is going to happen as economies open up and growth accelerates, before it stabilises and even declines as those left behind start catching up. But how do they catch up with the front runners? It can happen only when one invests heavily in their skills, education, access to finance (capital/technology) and innovative models of development that dovetail inclusiveness with faster growth plans.In 2022, India has registered the highest growth rate amongst all G20 countries and it is likely to do so even in 2023. That’s a matter of pride. And within India, when we talk about growth and wealth creation, one name stands out — Gautam Adani. In a recent interview with India Today, he revealed that his rise started with the liberalisation of economic policies during Rajiv Gandhi’s time, and got momentum with the 1991 reforms. But the year 2022 has seen the most explosive growth with his net worth rising to about $125.8 billion (as per the Forbes list on December 28, 2022) making him the richest man in Asia and third-richest in the world.Many critics say this is all due to his proximity to Prime Minister Narendra Modi. But then, why is the Chief Minister of Rajasthan hosting him as he announced plans to invest about Rs 65,000 crore in setting up a mega solar power plant of 10,000 MW, expanding a cement plant, and upgrading the Jaipur airport? Similarly, why did the Tamil Nadu government support him in setting up one of the largest solar power plants at Kamuthi? Even the West Bengal government has been wooing him for investment and the upgradation of its ports. The reality is that most of the top business houses work with all governments so long as it makes economic sense to them. Be it Adani, Reliance, Tatas, Wipro, and others — they all create wealth and millions of well-paid jobs. That’s their contribution to society. But they also give back to society through their CSR activities as well as through family foundations and trusts.A few years back, Azim Premji pledged to give away about half of his wealth to the society through Azim Premji Foundation. He topped the EdelGive Hurun India Philanthropy List in 2020. How many people are aware that Gautam Adani’s foundation is committing Rs 60,000 crore to give back to society through promoting better health, education, and skill development? This, said Adani, was the best gift on his 60th birthday.While all this is commendable, I feel there could also be an alternative model for shared prosperity. And that is making the less privileged partners in the journey of wealth creation. Let me elaborate. Since Gautam Adani is committing Rs 60,000 crore through the Adani Foundation to give back to society, here is a small idea that can make millions prosperous, if he takes it up as a priority.The largest share of India’s working population is engaged in agriculture (about 46 per cent). Their education levels are low and the average holding size is small (1.08 ha). The average household income hovers below Rs 20,000 per month at current prices. Of course, many marginal farmers earn even less than this. This is not enough to provide a sustainable demand base for a manufacturing revolution in India. Educating these people at a large scale or even creating new skills may be a long-drawn process. So, here is an idea that can augment their incomes substantially and quickly.Adani aims to be the largest player in green energy, especially solar. Solar farms today need a lot of land that is degraded. But land is scarce in India and I am not sure how far this model can be scaled up. The alternative is to have solar as a third crop on farmers’ fields. The designing of solar panels and structures has to be done in a manner that allows enough sunlight to come through for photosynthesis of crops below. Farmers can keep growing two crops below these solar trees that are about four meters high. The investment in solar panels will be done largely by entrepreneurs (say Adani Green Energy) with some equity participation by the farmers (say 10 to 15 per cent). Farmers will maintain these solar trees regularly. Power will be generated throughout the year and it can be fed to the grid at an agreed price. The farmer will get rent for his land and a share in the profits of power generation.This idea is being tried in a number of countries, including India. Our research in this area led to the setting up of a pilot in Ujwa KVK in the Najafgarh area in Delhi with the help of former Lt Governor of Delhi, Anil Baijal. Just two kilometres from the site of the pilot project, an entrepreneur, Surinder Ahuja (CEO, SUNMASTER), has tried out this idea on four acres and he is offering Rs 1.25 lakh per acre/year to farmers for using their land for solar and agriculture activities. This doubles farmers’ income within six months.The question is whether Adani can scale it a million times and create a revolution with farmers generating solar power along with food crops. Only then can the farmer become not only anna daata but also urja daata (giver of food as well as solar energy). This will be a true shared prosperity model.Gulati is Distinguished Professor at ICRIER. Views are personal
Referring to India’s export bans on food grains, International Monetary Fund’s Deputy Managing Director Antoinette Sayeh said countries should not impose additional restrictions as such bans hurt food importers as well as India. In an interaction with reporters in New Delhi, Sayeh also said relative to other countries, India is growing very robustly and there is room to grow further. Excerpts:Q: There has been a lot of talk about tackling geo-fragmentation, need to revive multilateralism in the backdrop of India holding the G20 presidency. India has been critical of multilateral organisations when it comes to taking greater action, taking stock of issues like crypto regulation. What is the IMF doing to revive multilateralism and taking action for global crypto regulations?A: We are very much looking forward to India’s leadership at G20. Given the convergence of areas, we think between India and IMF, we can best partner to strengthen multilateralism and certainly issues around dealing with the financial tightening, that is, considerable potential impact on emerging markets and developing economies and their access to financing, dealing with the pressures on the trade front, in particular, and fragmentation we have seen there already, dealing with debt vulnerabilities also that are significant for many countries and require a multilateral approach, bilateral creditors, private sector as well to deal with and areas of focus on the quota reform at the IMF, for example, and crypto regulation. All of those areas India certainly wants to be a leader in and we’re supporting India with analytic work and other advice and information that helps we think will be helpful to the leadership role.Q: With regard to India’s goal to be a $5 trillion economy, given the country’s growth rate, what is the view of the IMF on when this milestone can be achieved and what are the initiatives India needs to take to further that objective?A: India is certainly emerging and recovering very well from the pandemic…they’re growing so robustly relative to its peers and to the global economy as a whole. In the first three quarters of 2022, looked at on a year-on-year basis, the growth has been around 6.3% already, and our projection is that for this fiscal year, that is through June this year, India will be growing by 6.8% and then the next fiscal year by 6.1%. All of those are considerably in excess of what other emerging markets are doing, their average is some 3.6%. And the world economy, we’ve projected, will only grow by 2.7% this year. So, relative to others, India is growing very robustly and there is room to grow further and to achieve the potential growth that India has that is even higher. And to get to that, of course requires a focused attention on maintaining macro stability, addressing the considerable structural reform agenda that will still be there to elicit further investments from FDI, the regulatory issues that need to be addressed also in terms of the financial sector, and its ability to intermediate and to provide needed financing on a consistent basis, issues around labour markets that need to also be addressed. Implementing the labor codes at the provincial level at the state level, those codes already in existence or needing to be implemented to make sure that employment is strengthened. Those are all efforts that need to be addressed. Employment for women and youth are also very important to maximise potential contribution to growth. So those are some of the things that will be to be worked on. There are also some challenges around the agriculture sector that need to be further addressed, work on, to increase productivity there as well.Q: The European Union has recently announced a carbon tariff on certain imports. In terms of trade, it is seen as another non-tariff barrier, which is coming in at a time when the global economy is going into recession. What is your take on such import tariffs?A: I am not familiar with the details of what you’re asking. But clearly, there is a considerable effort underway in the European Union to address climate mitigation and the use of carbon taxes, it’s one of the instruments to do that. That has to be done in a way that does not undermine free trade, but it is nevertheless a very important instrument to help countries change the pricing incentives towards more greener investments and greener growth.Q: The disruption to inter-linked supply chains was especially seen after the Russia- Ukraine conflict and India focused on three Fs — food, food, fertilizer and fuel. What kind of impact do you see for these three areas especially if India plans any kind of restrictions, say, on the food grain side?A: We are hopeful that the improvements that we’ve seen in the supply chain recently coming out of the pandemic are sustained, and continue to be able to mitigate the impact on import prices. We very much want to encourage India and other countries that are food exporters to not put in place restrictions. Because it hurts food importers, but it also potentially hurts India. So we certainly don’t want countries to be imposing additional restrictions where it’s hard to evaluate this, there is a lot of uncertainty as we know, in particular, related to the war in Ukraine and we don’t know how that will be evolving in the course of the year and the impact that will have on wheat prices for example. And so all of that has to be factored in in navigating these very difficult trade offs that countries will face in managing potential persistence of food price increases and food price pressures.Q: You said food restrictions especially for wheat won’t help. We have seen India imposing an export ban. Do you mean such bans will not help going ahead?We encourage all countries not to put in place export bans. We have seen them in the past…some of them say that they do that to mitigate the price impact in their own economies. But in fact people find ways to circumvent those bans…it is important to ensure that the efforts that governments make to mitigate the impact of price rise on the most vulnerable are indeed on the most vulnerable and those efforts are better targeted. So blanket responses like food bans are not the advisable thing to do.Q: You’ve called India a bright spot, how insulated is it from global recessionary fears?A: The robust growth that we’re seeing in India, as I said before, but relative to where India has grown in this year, for example, we’re projecting 6.1% next year and some of that reflects what’s happening on the global front, where India is linked with its exports to markets that may be less demanding oor potential recessions and leading to not being able to demand for India’s exports as not as robust, as could have been the case. So India is deeply impacted by potential recession in the rest of the world, as are many other developing countries. So we do see a risk of a slowdown in growth in those countries because of what’s happening in advanced economies, some of which may be entering a recession period. On the question of private investment certainly, there’s a robust public investment programme that is being implemented in India and that expectations are that that programme will elicit potential there with focus on infrastructure, and other areas that are important to private investment will ultimately help to generate more private investment…on India’s ability to maximise potential growth, doing that requires a greater private investment and in return progress on the structural reform agenda that is necessary to attract more foreign private investments in particular. So that will be part of what the focus of the government will need to be to maximise private investments. Private consumption, in fact, has been contributing quite a bit to the rebalance. And it’s been very robust.Q: Article IV consultations stated how India should be more ambitious in its fiscal consolidation. India is continuing on a path for a medium-term target of 4.5 per cent, how much more ambitious can India get for that?A: We certainly think that there’d be more clarity in terms of the path of consolidation is envisaged, and efforts to put in place for medium-term fiscal consolidation. And we’re hopeful that this budget that will be presented shortly does contain a clear path to fiscal consolidation that also relies on the revenue side, building on the progress India has seen this past year regarding performance and so addressing issues around the GST, simplification of GST, for example, income taxes, excise taxes as well, that can be improved to help the revenue aspects of the consolidation is important. So more ambition on the revenue side for sure, and more clarity on the medium-term fiscal consolidation. That’s broadly the advice we have given.
Referring to India’s export bans on food grains, International Monetary Fund’s Deputy Managing Director Antoinette Sayeh said countries should not impose additional restrictions as such bans hurt food importers as well as India. In an interaction with reporters in New Delhi, Sayeh also said relative to other countries, India is growing very robustly and there is room to grow further. Excerpts:Q: There has been a lot of talk about tackling geo-fragmentation, need to revive multilateralism in the backdrop of India holding the G20 presidency. India has been critical of multilateral organisations when it comes to taking greater action, taking stock of issues like crypto regulation. What is the IMF doing to revive multilateralism and taking action for global crypto regulations?A: We are very much looking forward to India’s leadership at G20. Given the convergence of areas, we think between India and IMF, we can best partner to strengthen multilateralism and certainly issues around dealing with the financial tightening, that is, considerable potential impact on emerging markets and developing economies and their access to financing, dealing with the pressures on the trade front, in particular, and fragmentation we have seen there already, dealing with debt vulnerabilities also that are significant for many countries and require a multilateral approach, bilateral creditors, private sector as well to deal with and areas of focus on the quota reform at the IMF, for example, and crypto regulation. All of those areas India certainly wants to be a leader in and we’re supporting India with analytic work and other advice and information that helps we think will be helpful to the leadership role.Q: With regard to India’s goal to be a $5 trillion economy, given the country’s growth rate, what is the view of the IMF on when this milestone can be achieved and what are the initiatives India needs to take to further that objective?A: India is certainly emerging and recovering very well from the pandemic…they’re growing so robustly relative to its peers and to the global economy as a whole. In the first three quarters of 2022, looked at on a year-on-year basis, the growth has been around 6.3% already, and our projection is that for this fiscal year, that is through June this year, India will be growing by 6.8% and then the next fiscal year by 6.1%. All of those are considerably in excess of what other emerging markets are doing, their average is some 3.6%. And the world economy, we’ve projected, will only grow by 2.7% this year. So, relative to others, India is growing very robustly and there is room to grow further and to achieve the potential growth that India has that is even higher. And to get to that, of course requires a focused attention on maintaining macro stability, addressing the considerable structural reform agenda that will still be there to elicit further investments from FDI, the regulatory issues that need to be addressed also in terms of the financial sector, and its ability to intermediate and to provide needed financing on a consistent basis, issues around labour markets that need to also be addressed. Implementing the labor codes at the provincial level at the state level, those codes already in existence or needing to be implemented to make sure that employment is strengthened. Those are all efforts that need to be addressed. Employment for women and youth are also very important to maximise potential contribution to growth. So those are some of the things that will be to be worked on. There are also some challenges around the agriculture sector that need to be further addressed, work on, to increase productivity there as well.Q: The European Union has recently announced a carbon tariff on certain imports. In terms of trade, it is seen as another non-tariff barrier, which is coming in at a time when the global economy is going into recession. What is your take on such import tariffs?A: I am not familiar with the details of what you’re asking. But clearly, there is a considerable effort underway in the European Union to address climate mitigation and the use of carbon taxes, it’s one of the instruments to do that. That has to be done in a way that does not undermine free trade, but it is nevertheless a very important instrument to help countries change the pricing incentives towards more greener investments and greener growth.Q: The disruption to inter-linked supply chains was especially seen after the Russia- Ukraine conflict and India focused on three Fs — food, food, fertilizer and fuel. What kind of impact do you see for these three areas especially if India plans any kind of restrictions, say, on the food grain side?A: We are hopeful that the improvements that we’ve seen in the supply chain recently coming out of the pandemic are sustained, and continue to be able to mitigate the impact on import prices. We very much want to encourage India and other countries that are food exporters to not put in place restrictions. Because it hurts food importers, but it also potentially hurts India. So we certainly don’t want countries to be imposing additional restrictions where it’s hard to evaluate this, there is a lot of uncertainty as we know, in particular, related to the war in Ukraine and we don’t know how that will be evolving in the course of the year and the impact that will have on wheat prices for example. And so all of that has to be factored in in navigating these very difficult trade offs that countries will face in managing potential persistence of food price increases and food price pressures.Q: You said food restrictions especially for wheat won’t help. We have seen India imposing an export ban. Do you mean such bans will not help going ahead?We encourage all countries not to put in place export bans. We have seen them in the past…some of them say that they do that to mitigate the price impact in their own economies. But in fact people find ways to circumvent those bans…it is important to ensure that the efforts that governments make to mitigate the impact of price rise on the most vulnerable are indeed on the most vulnerable and those efforts are better targeted. So blanket responses like food bans are not the advisable thing to do.Q: You’ve called India a bright spot, how insulated is it from global recessionary fears?A: The robust growth that we’re seeing in India, as I said before, but relative to where India has grown in this year, for example, we’re projecting 6.1% next year and some of that reflects what’s happening on the global front, where India is linked with its exports to markets that may be less demanding oor potential recessions and leading to not being able to demand for India’s exports as not as robust, as could have been the case. So India is deeply impacted by potential recession in the rest of the world, as are many other developing countries. So we do see a risk of a slowdown in growth in those countries because of what’s happening in advanced economies, some of which may be entering a recession period. On the question of private investment certainly, there’s a robust public investment programme that is being implemented in India and that expectations are that that programme will elicit potential there with focus on infrastructure, and other areas that are important to private investment will ultimately help to generate more private investment…on India’s ability to maximise potential growth, doing that requires a greater private investment and in return progress on the structural reform agenda that is necessary to attract more foreign private investments in particular. So that will be part of what the focus of the government will need to be to maximise private investments. Private consumption, in fact, has been contributing quite a bit to the rebalance. And it’s been very robust.Q: Article IV consultations stated how India should be more ambitious in its fiscal consolidation. India is continuing on a path for a medium-term target of 4.5 per cent, how much more ambitious can India get for that?A: We certainly think that there’d be more clarity in terms of the path of consolidation is envisaged, and efforts to put in place for medium-term fiscal consolidation. And we’re hopeful that this budget that will be presented shortly does contain a clear path to fiscal consolidation that also relies on the revenue side, building on the progress India has seen this past year regarding performance and so addressing issues around the GST, simplification of GST, for example, income taxes, excise taxes as well, that can be improved to help the revenue aspects of the consolidation is important. So more ambition on the revenue side for sure, and more clarity on the medium-term fiscal consolidation. That’s broadly the advice we have given.
