To this end, it is necessary to first recognise in what condition India is at present. In what condition we desire it to be ten or twenty years hence? What crucial challenges we are likely to face? And how must we respond to these challenges? As for the firstpoint, more than 300 million Indians, a full third of our people, are to this day trapped in poverty. After 50 years of independence, almost 50 per cent of the population is illiterate, a percentage much higher than even countries like Kenya and Tanzania.

So the government's efforts should be for increasing literacy, reducing poverty and improving the quality of life of the poorest. These aims can only be attained if India as a whole is able to earn more, waste less and become more efficient and productive. The country's GDP has grown at a rate of a little under 4 per cent per annum for the last 30 years. This has just not been enough. India has to grow faster.

It is estimated that if India is able to achieve a growth rate of 11 per cent per annum for the next 20 years, its GDP on purchasing-power parity basis would equal that of the US. To achieve and sustain growth of anywhere near this magnitude, it is necessary that India identify its natural advantages and structure its growth around them.

One suchexample is the foods sector, where India has tremendous natural advantages. India is already the world's third-largest food producer. This is despite the country's pathetically low production yields; yields in agriculture and milk products are less than 40 per cent of the world's best. A recent research report describes India as "the potential food factory of the world". Another example could be the software sector where India is already proving itself globally competitive.

The challenges India faces in its search for sustainable competitive advantages are many and varied. Apart from the challenge of tackling problems like an excessively regulatory regime, a massive unproductive public sector, lack of social justice and tremendous government bureaucracy, corruption and waste, India's major challenges in future will emerge from the rapid technological changes taking place in the global economy. Consider the profound changes enveloping the world on account of the explosion of information technology. It isexpected that computers will become cheaper and networking faster.

Networking society is expected to dominate society, if it does not take it over entirely. It is visualised that Internet trade will be worth $360 billion by 2003. In such a scenario, what will be the future of almost any industry whose services can be made faster, better and cheaper with networking. Banking, for instance, is already seeing a major shift in the way its activities are carried out.

ATMs are not only making tellers but even entire branches redundant. The challenge is regarding will India do with the 1,80,000 people working in the State Bank of India? Protection is no answer. It would only stifle productivity, weaken the nation's competitiveness and create further unemployment in the long run. An effort to protect one's job today will only inhibit the ability to create two jobs in the future.

An Indian industrialist recently said: "India's problem is not a dearth of jobs, but the fact that most of its labour is simplyunemployable." These situations are bound to intensify, as an increasingly integrated high-tech world eats into traditional job opportunities. What should be our response to such challenges? Increased isolation from the world is no answer.

Our socialist policies have only made India poorer. The country's interest payments already consume more than 45 per cent of government revenues and are multiplying at 17 per cent per annum. In the budget, Rs 750 billion has been provided for interest. The road map shows that by 2001, the government's entire revenue income would be equivalent to interest payments.

What then? Will marginal taxation rates again reach 90 per cent and more? The entire south-east Asian countries are in a crisis and are cleaning up. China is closing down its public sector. If it succeeds, it will become immensely competitive, and it will be very difficult for our country to think of any exports, unless we too become productive and innovative.

As Peter Drucker puts it, "if we continue toimprove productivity of all key resources and our innovative standing, we are going to be profitable. Not only today, but tomorrow." We, too, have to close down what is bad and open what is good. Close down all the PSUs, which constitute above 30 per cent of the nation's gross fixed assets and earn a meager 3 per cent return.

Only 1.1 per cent of the organised labour force is with the public sector. Give them an attractive VRS and get them off the nation's back. Reduce government expenditure by cutting subsidies, minimising regulations and cutting defence expenditure. Remove all barriers to FDI inflows, which will boost infrastructure development and productivity in the economy.

Only with a production and innovation revolution can we dream of a 8 per cent GDP growth, which will bring the nation to the doorstep of an economy in which none is poor. It will take more than ever before to become and remain competitive in a rapidly integrated and fast-changing high-tech world. These new realities areirreversible. We have to recognise them, live with them and learn to manage them. But is our leadership invested with the wisdom, the humility and the courage to perceive them?

(The author is the chief of Parag Parikh Financial Services)