London, June 19 : Goldman Sachs Group Inc., the world's largest investment bank, has outlined 10 things for India to improve upon, in order to achieve its potential and grow 40 times by 2050.
According to Goldman Sachs' global research report on "Ten Things for India to Achieve its 2050 Potential," the world's second fastest growing economy has the potential to even outgrow the US economy by 2050 provided it pays attention to the following ten fields: (1) improve governance (2) raise educational achievement (3) increase quality and quantity of universities (4) control inflation (5) introduce a credible fiscal policy (6) liberalize financial markets (7) increase trade with neighbours (8) increase agricultural productivity (9) improve infrastructure and (10) improve environmental quality.
"Having the potential and actually achieving it are two separate things," the report says bluntly.
"Delivery of all these and more would ensure strong, persistent, medium-to-long-term growth, allowing India to reach its amazing potential," the report, written by Jim O'Neill, head (global research), Goldman Sachs, and Tushar Poddar, vice president (research), Asia Economic Research Team, Goldman Sachs India, said.
The report said India is ranked 110 out of 181 in Goldman's "growth environment scores", a system that ranks the development climate in various countries. That puts it behind other emerging markets such as China, Brazil and Russia.
"Without better governance, delivery systems and effective implementation, India will find it difficult to educate its citizens, build its infrastructure, increase agricultural productivity and ensure that the fruits of economic growth are well established," the report said.
Goldman highlights India's literacy rate, which is as low as 61 per cent. India is projected to add 310 million people -- about the population of the US -- to its population of 1.1billion by 2020, The Financial Times reported.
This implies a massive increase in public education spending; beyond the 3 per cent of gross domestic product it currently spends to upgrade its already faltering school and higher education systems.
The report also cites governance as one of India's biggest issues. The problem is not too much democracy but too little. India's public services suffer from a lack of accountability. In health, water and education the state is the regulator and provider of services, yet politicians are nowhere to be seen once they are elected.
On the economy, the government needs fixed targets for inflation and the fiscal deficit. India's deficit, if it is combined with various off-budget subsidies, is one of the highest in the world and is projected to reach more than 7 per cent of GDP this financial year.
According to the investment bank, if India works harder on the necessary reforms and implements the changes, it could raise its economic growth potential annually by as much as 2.8 percent and reach double digit economic growth, which China has been able to record.
GES, introduced by the investment bank in December 2005, aims to summarize the overall structural conditions and policy settings for countries globally.
To arrive at a score on a scale of 10, Goldman Sachs looks at 13 variables including inflation, government deficit, external debt, investment rates, openness of the economy, penetration of personal computers, phones, Internet, education, life expectancy, political stability, rule of law and corruption.