Follow Chinese Political model: Goldman

The artical originated from Financial Express.

MUMBAI, OCT 3: Indian policymakers may find this shocking, but some foreign investors are recommending radical changes if India wishes to be one of world’s largest economies. Jim O'Niell, MD and chief of economic research, Goldman Sachs, a leading global investment bank, on Tuesday suggested that if India wanted to be the third largest economy by 2050, “it might just have to follow the Chinese mode of political system”.

Speaking in Mumbai at the 2nd annual Funds World India 2006 conference, he said, “For India, being democratic might not be the key to economic progress. An important dynamic for the next stage of economic development and globalisation for India would be to adopt another form of political system.”

O’Niell explained that in order to be the third largest economy (after the US and China) by 2050, India would need to make considerable labour reforms, and that would be difficult in the country’s current political scenario. He added, “Labour reforms is the need of the hour for India, and it might just have to take a leaf out of the Chinese political system.”

So how realistic is India’s BRICs dream? O’Niell said, “Though the lowest of BRICs on GES (growth environment scores), India has the potential to be fifty times bigger and thirty times wealthier by 2050. However, India needs clear and accountable macro policies, more openness to trade and FDI, and much broader quality education.”

O’Niell said, the future growth of the Indian economy would also be linked to its ever-increasing population. He stressed that it was here that India should cash in, and have more and more skilled labour.

“India’s work force will cross that of China’s, and there will be a rush for skilled labour. And with the present labour law high-handedness in India, the picture doesn’t look that convincing,” he said.

He also added that, to ensure conditions of growth, India should have sound and stable macro-economic policies, strong and stable political institutions, and a high level of education.

O’Niell’s research claims that by GDP 2010, India’s annual increase in demand could match that of the G-6 countries.