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Enter the campus at Infosys Technologies Ltd.

, Bangalore, and you would find lots of youngsters moving around with gadgets like Apple I-Pods, High-Tech Mobile Phones and Latest Electronic Gadgets. This reflects the face of the new India. Just a few years back, the same companies were having a hard time trying to make a mark in the global industry. The same reflects from the fact that Infosys was able to achieve $ 1 Billion in around 20 years whereas the next $ 1 Billion have come in around 1.5 years. India: Down the History Line India has been able to showcase a total turnaround in not just economic growth but in most factors of growth like literacy level, poverty level, industrialization and others. One of the major bottlenecks in India's growth - population - is today one of the most important reasons in India's Success Story. Starting around 1980, the Indian economy became a veritable dynamo, posting an average growth of nearly 6 percent per year over the last twenty-five years. As Raghuram Rajan puts it, the only reason we have been able to achieve this phenomenal growth is "Constrained Adaption". "Constrained" because of the numerous policies and regulations inflicted on us by an untrusting government, and "adaptation" because Indians are by nature entrepreneurial. Till 1980, there were lots of unintended policies produced and implemented. Few of them are listed below: In

order to protect the domestic enterprise, barriers were erected against foreign competition, thereby giving a respite to our own industries. But the nurturing environment proved so comfortable that our infants adapted never to grow. Ambassador acts as a brand ambassador for this category which remained unchanged for 50 years and even made our thinking that "Its only change which is constant" a tap. These constrained policies were founded with a motive to use the scarce capital resources in the most effective ways possible, and hence, sectors like electrical and petroleum were commandeered by public sector. Sectors in which private entrepreneurs were allowed in, were heavily constrained by regulations, and hence, the outcome was that the scarce resources were inefficiently used.

As employment was important in India, government encouraged small scale industries by reserving specific areas of production for them. But as the firms could not grow, production became unprofitable, and hence, government has to pitch in by making laws to protect labor.

This led to small firms resorting to less numbers or contractual labor, hence the labor laws neither help to increase the production nor were they able to protect the labor. Permit Raj - To encourage India's self sufficiency with respect to all products, the government instituted a number of controls in forms of licensing and trade restrictions. This was nicknamed "Permit Raj". This led to entry barriers and bureaucratic procedures, thereby keeping the controls in hands of individual who had vested interests.

Institutional & Regulatory Environment - India is a large country not just in size but also in terms of culture, languages, religions and contrasting cultures. Keeping the heterogeneity in mind, there exists a binding institutional framework. But the efficiency and efficacy of these institutions leaves much to be desired. World Bank indicators of governance and obstacles in doing business show a significant room for improvement in India not just in comparison to developed countries but even with countries like China.

This failure on the part of Indian Government led to low growth of Indian Economy. Indian industry was inefficient and exported very little. Surprisingly, these policies did not mean that India produced less manufacturing goods as a whole for a country at its stage of development.

It did mean, however, that the composition of its manufacturing activity was unusual: India produced more than its share of capital - and skill-intensive goods (think public sector petrochemical plant), while underutilizing what it had in plentiful supply - its abundant labor or even its innovative capacity. Change in Indian Governance It was only in 1980, that the government attitude changed towards economy, and private sector started to change. Till 1990, lots of pro-business reforms were set in motion with liberalized access for domestic firms to imports, technologies and foreign exchange. India Shining Year 1990-91 can be regarded as a year of blessing in disguise. The newly-elected government faced a severe balance of payments crisis, which forced Indian Government to approach International Monetary Fund (IMF). IMF Granted the funds but on the conditions where in India was forced to make major economic reforms. India removed all import and capacity licensing restrictions, and subsidies were reduced from 300% to 110% by 1993. 40% Cap on FDI was removed and RBI granted automatic approval of 51%. Broader reforms that were more genuinely pro-competition were introduced - barriers to foreign trade were dismantled, inward foreign investment was liberalized, and important services such as telecommunications and finance were opened up.

Politically, India became more de-centralized and the power of Congress started to wane. Regional parties started to come into the fore-front and forming the government without collations became only a remote possibility. States increasingly prospered, or not, based on what they did rather than because of actions at the center. These changes were able to reflect on the Indian economy and with greater de-centralization, better run states, such as Delhi, Gujarat and Karnataka have improved the quality of their infrastructure and business climate, attracted more investment, and surged ahead. Dream run of the most prolific Sector in Indian industry started around the same time. IT Services Sector started to have a boom time with government going out of the way to help their cause. They moved from strength to strength, and today, IT Sector accounts for around 56.2% of India's GDP and have 70.5% share in India's National Income. "Just like China drove down costs in manufacturing and Wal-Mart in Retail, India will drive down the costs in services."

- Nandan Nilekani, CEO - Infosys Tech Ltd. Deep source of low cost, high IQ and English-speaking brainpower of India has played a major role in deviating the odds in favor of India. The talented manpower has played a pivotal role in India's economic development not just in Services sector but also in other sectors like Automobiles, Agriculture, etc. Manufacturing Sector has also played its role in India's growth with a sterling performance in the last 3 years. It has been able to show resilience in face of volatility in Agricultural sector. The superstars of the current phase of manufacturing recovery are iron and steel, machinery and equipment, including transport and basic chemicals sectors. More interestingly, we observe that most of the sectors that have witnessed a rise in production have, in fact, witnessed a growth in exports, which has grown at a much higher rate. Financial Sector, in particular banks, plays an important role in economic development of a country since it facilitates the intermediation between savings and investment, thus fostering the economic growth. However, the Indian banks haven't been able to perform well in mobilizing the funds into loans. Instead a big portion of banks asset is invested in domestic government bonds. The new framework presented by Reserve Bank of India would help in reforming the present Indian banking system, which is dominated by public sector banks. It is likely to usher in consolidation in the public, private and domestic banks, and also come up with lots of relaxation of several regulations for foreign banks to enter India. Foreign Direct Investment was slow to enter India, but as Indian economy started to open up, many major multinational companies started shifting their base towards India. But Indian infrastructure, in terms of power, roads, seaports, etc., have been the deterrents in the path of these companies towards Indian soil. Also, Indian bureaucracy continued to be a problem with foreign investors.

Figure 1: Shows Investors Interest in India

Figure 2: Room for Improvement in Terms of FDI Last 3-4 years saw a wave of privatization wherein lots of government held organizations, which haven't been performing up to the mark, were privatized. Companies like VSNL became a part of TATA Group. Education "Education is the foundation for a vibrant democracy, growth of productivity and income and employment opportunities." - India Vision 2020, Planning Commission, Government of India The literacy rate in India has been improving since the past 50 years, wherein we have states like Kerela which have literacy rate of as high as 90%. On the flip side, states like Bihar and Uttar Pradesh come close to only 50%, and hence, education should remain as the top-most agenda for India in the coming years. But increasing this level further is critical in order to boost the country's productivity. Advances are particularly needed in the education of women. As of 2000, the female literacy rate is half of the figure for male population. Also a study by India's International institute of population sciences revealed that poor education of Indian women can be correlated negatively with health of her children. Indian universities have not been able to grow at the same rate as the requirement or demand for the skilled brainpower. Though institutions like IITs and IIMs have been able to achieve worldwide fame but these institutions do not cover the majority of Indian population, and hence, India needs to multiply similar institutions. Where does the Path Lead to? Though we have been able to grow at a phenomenal rate, there still exist loop-holes, which need to be filled. Few of them are like increasing literacy rate, improving the standard of living, reducing poverty, etc. India needs to focus on the deteriorating conditions of urban living, due to rural to urban migration. If India wants to compete with international organizations, it should be able to attract quality knowledge workers.

Infrastructure management can be dealt as a special subject during the education life spam of an individual because most of the clogging taking place in India today is because of mismanagement. India has been successful in creating jobs for the skilled workers but the job scenario of unskilled workers has not shown much improvement in the past few years. Most of the unskilled workers are a part of laggard states and as Raghuram Rajan puts it "Ideally, of course, the laggard states would reform on their own. They would scrap archaic labor laws, improve infrastructure and the business climate - and utilize their vast pools of under-employed low-cost labor to attract investment in labor-intensive manufacturing and agri-business. They would thereby catch up with the leading states in India." Can India Sustain the Growth in Future? The profile of the Indian economy and equity market suggests that the current boom is born of global trends. The acceleration in the growth rate has been accompanied by a decline in inflation and a rally in the equity market that mirror the experience of the average emerging market in recent years. When the class of emerging markets fades, India too is likely to lose some of its sparkle. Also, if the oil prices remain at $70/barrel, there is every possibility of reduction in India's growth rate. "We will have to revise our projections downwards, if oil prices remain at US$70 a barrel," ADB Chief Economist, Ifzal Ali, said, adding that surging crude prices were a matter of concern for India and some other countries in the region. Implications of Such a Growth in Future The implications of the projected growth of 6% on average over the next 10-15 years are manifold:

A larger and richer consumer market will emerge.

Consumptions pattern will change with expenditure on healthcare, transportation and communications increasing exponentially. Household saving would increase considering a large number of population is entering the working phase.

There will be a rising demand for diversified financial instruments to invest those savings.

Conclusion India has seen phenomenal growth in the last 50 years and has been one amongst the fastest growing constituencies in the world. Considering the same potential growth, we can expect India to be at the forefront of developed and developing countries. There will surely be obstacles on the way but we believe that integration of India and ensuing transformation of the country are here to stay. As Jeniffer Asuncion Mund says, "The Pace of India's transformation will ultimately depend on the will of Indian population and vision of its leadership."