Sunday, January 19, 2020

Towards Indic Economy - Part 1

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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 2.5 India License.

Author : Shri Rama Yeleswarapu

The stupendous reelection of Modi government, on the basis of its corruption-free and efficient governance, created a new wave of optimism about India’s raise as a world power. Fitting to the mandate came solutions to various civilizational issues, such as J&K, Ayodhya Rama Janma Bhoomi, Women equality (3T) and CAA, that were pestering the Indian civilization for decades and even centuries.

With the civilizational deck being cleared of its aberrations, the Modi-2 administration is preparing to lay the judicial, administrative, security, civic-infra, ecological and economic foundations on which a New India to be built to stand as a world power that reflects its civilizational potential.

At the outset, it is important to keep few facts in mind. Firstly there is the definition of GDP and its nominal (Real) and purchasing power parity (PPP) flavors. Second aspect is the way GDP is measured and what human activities of the civilization are accepted as economic activities and included in GDP calculation and which human activities are not included. Finally the huge difference between what is a nation’s current GDP and what is the potential GDP of a given nation.

This article if first in the series to study, understand, analyze and explore the viswaroopa of Indian Economy and identify the opportunities to reflect the underlying Hindu Civilization so the economy resonates with its civilizational aspirations. When we talk about the potential economic might of India’s civilization, we are talking about its 32% share of World GDP (ref: Angus Maddison) when India was free from foreign invaders. As of 2019, India’s real GDP is about $2.9T (3.8% of world GDP) and PPP GDP is $10.5T (7.4% of world GDP).

In this article, we shall outline the basic requirement or expense sheet of key aspects of Indian economy; assuming the nation has to achieve first world level of Sustainable Human Development score of 0.8 and above (SDG score >=0.8). This analysis is done to understand where India stands today and where it needs to be in 10 years by 2030 and what investments it need to make. This structure also helps us to identify the opportunities that India can explore to make its economy reflect its underlying civilizational ethos; which we shall explore in upcoming article(s).

 1 Food Security

The economy must ensure food security for at least 150 crore Indians and Hindus worldwide. This 150 crore number covers both the projected population growth as well as the Hindu diaspora around the world who might need to seek refuge in Bharat in case of man-made calamities.

The current share of agriculture in India’s GDP is 15% or about $450B. Adding the $50B food subsidies govt provides and another $50B farm loan waivers; our food security cost at present is $550B. Adding inflation and diaspora, we can safely assume that our food security cost is $1000B

There are other dimensions to India’s food security opportunity, which were explored in detail HERE.

Cost of food security in GDP: $1,000B per year

 2 Energy Security

India imports 40% of its energy bill and it costs about $120B. This translates to an annual energy bill of $300B.

This energy foot print will double in order for India to achieve first world (Human Development Index >0,8). So Bharat’s  energy security requires $600B energy consumption.

Modi Govt has put two goals for itself:

One is to achieve all new energy supply using renewable energy sources. This translates to an energy bill consumption of $300B per year OR at present interest rates about $2T investment opportunity. India should strive for 100% ownership on entire supply chain of these new energy sources; including R&D, construction, operationalization, maintenance, supply, storage etc. This $2T investment over next 10 years must include Thorium based nuclear energy, Solar energy, Energy storage grids etc.

Second goal of Modi government is to reduce the share of  foreign energy imports to 10% of energy bill. So even in the future scenario, the energy imports component will be limited to $60B (10% of $600B) per year. These energy imports are expected to be compensated using various bio-diesel alternatives. This also gives about $400B investment opportunity in bio-diesel technologies, supply chains etc over next decade.

Cost of Energy Security: $600B per year

 3 Digital Security

At present India has a healthy coverage in digital technologies and adoption. The gaps are mainly in R&D, owning technology and bringing all other civic and business processes on to 100% inter-connected and mutually supporting digital platforms.

Assuming an annual per-capita cost of digital infra to be $300 (Rs 1500 per month per person for data/process/device costs) nations digital infrastructure cost would be about $450B per year (1.5b people x $300).

The actual investment that need to happen is bringing all other aspects of socio-economic life such as agri, police, security, social media, business, finance, entertainment etc on to digital platforms.The overall investment required in this sector will be more than $1T over next decade.

Cost of digital security: $500B per year

 4 Territorial, military and internal Security

Given India’s territorial ambitions and claims, geopolitical environment and responsibility towards global peace, Indian Military needs to be equipped with best of world infrastructure and hardware.

Similarly, India’s internal security apparatus need to be upgraded, manned and equipped to serve 1.5 billion people having a safe and speedy security cover.

This area needs $500B infrastructure investment over next decade and the military and internal security budget need to be upped to $250B per year

Cost of territorial and internal security: $250B per year

 5 Labor Security

At present India’s labor force participation rate is 50% (that means only 50% of working age population are either employed or seeking employment). This is so because majority of the female population does not seek employment outside their homes. They are home makers; which is also economic activity.

India currently has about 860 million working age population (Age 15-64) and is expected to cross 1.1 billion people by 2035.

Assuming the labor force participation increases to developed economy level of 60%; India would have to create active employment for about 700m people.

A $12000 (Rs 8L/year, the baseline for EWS reservations) per-labor income means $8.4T economic activity. A 30%saving (economic reinvestment) results in $2.5T investment into the GDP.

A 10% increase in participation rate combined with increase in working age population from now to 2035 translates to an additional 230 million labor force. India has to create necessary economic activity to absorb all this 23 crore new labor force while increasing the existing labor force per-capita income to Rs 8L+ per year.

All this labor activity requires necessary post-retirement social security systems.

Cost of Labor force security a.k.a social security: $100B per year

 6 Civilizational Security

Ensuring that Indians can celebrate their life (birth, other important events like upanayanam, marriages, death etc) as well as festivals and continue their civilizational heritage and uniqueness.

For example, the marriage industry in India is estimated to be $50B/year second only to USA ($70B/yr). Similarly a Hindu family normally spends $50-$150 during Diwali. This means 300 million Hindu families spend up to $150B per year just to celebrate one festival, Diwali.

Cost of civilizational security: $1,000B per year

 7 Trade Security

To ensure India can have enough resources to sustain its international trade, balance of payments and trade related activities.

Currently India maintains $500B forex reserves to sustain a $3T economy.
To sustain inflation and economic growth rate, India need to add an average of $50B per year to ensure balance of payments and another $50B to ensure the security and insurance of its trade routes.

Trade security: $100B per year

 8 Water Security

To provide enough water for India’s domestic, industrial and agricultural security, India needs to continue building reservoirs, dams, water harvesting techniques, water saving technologies and de-salination plants.

For example Telangana state alone spent at least $5B per year to build water reservoir/dams over past year.

Modi’s Nal-Se-Jal project is expected to spend upto $100B over next 5 years.

Water Security: $100B per year

 9 Ecological Security

To sustain ecological balance on india’s land, water, air, forests and oceans.

For example Ganga rejuvenation project alone is expected to cost anywhere between $10-20B over its life time.

Ecological Security:$100B per year

 10 Technological Security

Cost of education, higher education and R&D in 100 major areas with associated research labs.

Technological Security:$1,000B per year

 11 Civic Infra

Housing, roads, railways, airports etc that need major renovation and reconstruction every 50 years

For example, in housing alone, 150 crore Indians translates to 46 crore families needing about 10 million (1 cr) new houses built every year in perpetuity assuming a 50 year lifespan for a house.

Civic Infra security: $2,000B per year

 12 Health Security

Currently India spends 1.4% of GDP ($45B or $63 per head) on health care to provide a HDI 0.65 score health services. Other OECD nations spend anywhere between 20-100 times this money.

Assuming India develops a first world health care sector at the lowest cost provider, India will require to spend at least 20 times more on health care.

Health Security:$800B per year


If we sum all the above items, we are looking at an India spending $7.5T/Year just to maintain basic securities at a SDG/HDI score of 0.8. On top of this, India need to save at least 30% of its GDP to sustain the upcoming retiree bulge and future civilizational goals and challenges between 2035-2070. This translates to an India of $10T economy saving $3T and spending $7T to ensure basic securities. As we can see this is close to the amount of money required to employ all its (willing and employment seeking) labor force as described in point 5 – Labor security.

This is the goal we are looking at over next 10 years. Turning India into a $10T (real not PPP) economy by 2030.