‘Low domestic offtake’s the real danger’ : CK Prahalad
Despite exports being the hardest hit by the global downturn, management guru CK Prahalad believes it is weak domestic offtake that will have a real impact on India's growth story. The decline in export volume in recent months — thanks to the slackening demand in foreign countries — is expected to result in tens of thousands of workers being laid off in sectors like textiles, metals and mining. Professor Prahalad said domestic consumption will drive India’s growth in the near term and pushed for more measures towards the same. Furthermore, he was confident that India will grow at 7.5-8% this year, despite weak investment and demand cues. This is possibly one of the most positive estimates given out recently as various government and industry experts’ estimates vary between 5% and 7%. Professor Prahalad touched upon how India can leverage global competitive opportunities in the present scenario. “I want India to lead and not follow. We need to develop next practices and not just follow best practices." About the economic crisis sweeping across major economies, Prof Prahalad said, "The financial crisis has demonstrated interconnectedness of nations. But countries can't be painted with the same brush. They need to have a global perspective, but develop local solutions." On FIIs pulling back their investments from India to recoup their losses globally, he said, "It is actually a good opportunity for the diaspora to invest in India, which is the safest market and not the US, Europe and Japan." Prof Prahalad added that the slump in India's exports will not derail the economy. "The real impact will come from slowdown in domestic growth. My prescription is "spend" for India since we already have a record of saving." Rate cuts, elimination of luxury taxes, making goods affordable, among other measures, would fuel domestic demand, he said. "Ashok Leyland's output is 74% down compared to the same period last year. This cannot continue. There should be more spending on infrastructure to create roads, ports and power plants." "The crisis is too precious to waste. We need to build a new a approach to develop India. It’s an opportunity for the diaspora to participate as investors, entrepreneurs and well-wishers."