This refers to the report "Rajan sings a different tune, pitches for 'Make for India'" (December 13). What Reserve Bank of India Governor Raghuram Rajan said made a lot of sense. The world does not have the appetite to buy Indian goods at a rate comparable to what China, and earlier Japan, Korea, Taiwan or even Thailand could achieve. China still has enough flex to keep the exports up and costs low. Also, merchandise export from manufacturing growth will never be able to absorb the millions of Indians who want to move out of villages and from agricultural and fringe jobs. Domestic demand-led growth has nevertheless three obstacles. Higher domestic demand means lesser domestic savings. In turn, that means India will have to depend upon foreign savings to finance its imports of energy, gold, defence and capital equipment. Such excess dependence will be highly risky if it they are foreign institutional investors or debt funds. And foreign direct investment is unlikely to happen since India has so little to offer that the foreigners will like to buy.
Finally, such growth can be highly inflationary; it means continuous struggle to find the right value of the rupee and high domestic interest rate to stop dis-savings. India has to work out a less energy, less capital and less water-intensive path to development.
P Datta Kolkata
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number
