India Inc, here’s how to prepare for post Lok Sabha polls

By: Jaithirth Rao, Founder and Ex-CEO, MphasiS


How will India Inc think of India after May 16? Or rather, how will a new government change medium terms prospects. That’s the question many readers of this newspaper will be pondering. Here’s my take. Consider three scenarios. Being a GDP junkie, I classify each scenario in prospective GDP terms.

SCENARIO 1: Let’s call it the “Modest Dream”. GDP growth climbs back in the medium term to a 6/7 percent level. The fiscal situation and investment climate improve somewhat. Being eternal optimists, we start congratulating ourselves. But at the end of ten years we still remain a poor country, far behind our East Asian neighbours and gradually falling behind even Myanmar and Bangladesh. The world by and large ignores us. Our internal and external security situations remain difficult, but do not cross intolerable limits.

SCENARIO 2: Let’s call this the “Good Dream”. GDP growth climbs back to 8% and within a few years actually touches 10%. The fiscal situation and investment climate are really robust. India is finally on a roll. Poverty levels drop steeply; employment grows vigorously. We begin to resemble East Asia somewhat. The world takes us seriously. Our neighbours see great advantage in resolving disputes. Our internal security improves especially because we implement overdue police and judicial reforms.

SCENARIO 3: Let’s call this the “Bad Dream”. GDP Growth rate stays stuck in the 4 to 5% range. The fiscal situation and investment climate remain messy. Job growth is poor. Poverty reduction is anaemic. Civil unrest becomes quite endemic. The world looks at us with amused derision. Our neighbours see some advantage in taunting us.

SCENARIO 4: Let’s call this the “Nightmare”. GDP growth rate drops to 3%-4%. The fiscal situation deteriorates dramatically. India is downgraded to junk status. New investment drops to zero. Capital flight is the order of the day. RBI desperately imposes severe exchange controls. Rich business families migrate literally and financially. Talented middle class persons try and get visas to any country which will have them. Civil strife reaches epic proportions. The world at large writes off India as a basket case. Our neighbours start getting really adventurous. The UN and other organizations (G-7, G-20 etc.) express concern, but do nothing. There are existential questions about our republic.

And now, here is some free consultancy: contingency plans for each scenario:

MODEST DREAM:This is a high probability scenario. This is also the scenario that requires you to do the least. Just wait, keep complaining as you always have, keep hoping, as you have for so many decades now; but do keep up with your overseas diversification plans. Remember that in ten years Myanmar and Bangladesh are likely to be richer. Having beach-heads there seems like a good proposition.

GOOD DREAM:This is a modest probability scenario. This requires that you work very hard. The market will get very competitive; consumer choice will increase; you cannot afford to be slow or complacent; you must make great effort to ensure that you access capital and talent. The rewards will be great. Ironically, even if your own company does not do well, you will for sure live in a better country, a country that holds out bright prospects for your children and their children.