.

Sustainable development means the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It is a (type) pattern of economic growth in which resource use aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come. Partha dasgupta says Economic development is sustainable if, relative to its population, a societys productive base does not shrink. Dasgupta and Maler (2000) defined sustainable development as a path in which each generation should bequeath (give, leave) to its successor at least as large a productive base as it inherited from its predecessor. Accordingly, sustainable development is concerned with what legacy (gift) should earlier generations have to later ones (Titenberg, 2003). The concept is intended to embrace the idea of ensuring that future generations inherit an Earth which will support their livelihoods in such a way that they are no worse off than generations today (Pearce and Atkinson, 1998). It also entails creation of wealth (Hamilton and Clemens, 1999). Thus, economists are leant to use the capital approach as (and hence weak sustainability as their criterion) which they are most familiar with. In short, for economists, development being substituted by increased utility, sustainable development refers to nondeclining utility (Pezzy, 1989, Pearce and Atkinson, 1998 Essential elements that are needed to achieve high rates of sustainable economic growth include: accountable governments: A government that is willing to adopt effective and transparent public management of the economy, providing a safe, stable, and attractive business and industry environment, which will ultimately strengthen its ability to fulfill its responsibility for the welfare of the people; open and effective markets: A business environment that stimulates entrepreneurship, is open to competition and market expansion, imports outside knowledge, and maximizes investment opportunities;

infrastructure: A developed and maintained infrastructure, including transportation and communications systems, that enables access into and between marketplaces; capable human capital: A diverse, skilled, and qualified workforce that meets the demands of the economy; equality of opportunity: A social and economic environment that upholds equality of opportunity for both women and men; and sound environmental management: Sustainable and responsible management of natural resources and appropriate responses to climate

impacts that enable the long- term viability of the economy.

Sustainable Economic development in India India seeks(wants) rapid economic growth that will create wealth for our people and also generate surpluses to fund our ambitious social development programmes, particularly in the areas of health, education and environment protection. Second, we seek growth that creates employment and development that is socially and regionally balanced and inclusive. Third, we seek to build a modern, knowledge and science-based economy to complement our agricultural and industrial base. Fourth, we want our development to be sustainable so that the wealth of our natural resources is conserved for future generations as a matter of trust...." Indias recent growth patterns The Gross National Income grew by more than 9.5% from 2005-2008. Last year (2010), the growth rate was 8.9%. In 2009, despite the world economic crisis, India, with a growth rate of 6%, was among the 6 South East Asian countries with respectable positive economic growth rates. Rapid normalization of financial conditions, both globally and domestically, and improved business and consumer sentiment have led to a rebound in domestic demand since April 2009. Private consumption would benefit from robust growth in disposable income and employment while investment would be boosted by rising business confidence, robust corporate profitability, and favorable financing conditions. As uncertainty about the sustainability of the recovery continues to recede, investment would accelerate significantly following a couple of quarters of strong domestic growth and stable global and domestic financing conditions. This scenario is consistent with below-trend growth in advanced economies as domestic demand would remain Indias principal growth driver, but assumes low international financial market volatility and a positive outlook for corporate funding and capital flows. Preliminary evidence from fiscal multipliers also suggests that GDP growth would benefit from the direct impact of government spending (e.g., the implementation of the 6th Pay commission by the states and other public sector entities) and the delayed impact of tax cuts on investment.

Conclusion Economic Growth in India may become unsustainable because of poor state of infrastructure, social and regional imbalances, and looming environmental threats, including water and energy shortages. However, these weaknesses if properly addressed, could spur further growth, thus making economic growth sustainable: .."infrastructural development could become a new growth industry; .....social and regional imbalances could spur even greater efforts to move economic growth to lower/low growth communities and regions in India; .....looming environmental threats and the shortage of water and energy could meet with innovative solutions, bringing about new products and services, and even new industries, which could themselves spur further economic growth.

The fact remains that India has one of the highest investment rate as well as economic growth rate in the world. Indian firms have developed and prospered mainly because of the creativity and innovativeness of its people.

Current Development Issues Facing India Despite the increased GDP growth and the aggressive foreign investment, India still faces some major hurdles on its path to sustainable economic development. This section briefly addresses three of the most prominent obstacles: income disparity, poor infrastructure, and underdeveloped capital markets. The following is meant to be a brief summary of each and is by no means an exhaustive discussion.

Income Disparity Even though the economy has grown at an excellent rate, and poverty has been reduced by approximately 10%, one quarter of Indias 1.05 billion people still live below the poverty line. 1 The majority of the population lives in villages with a population of less than 5,0002 and is highly dependant on the agriculture sector. Additionally, the rapidly growing private sector

firms are concentrated around Mumbai, Delhi, Bangalore, and Chennai. In contrast large parts of Indias most populous areas in the north and east are particularly poor and

1 2

www.cia.gov, The World Fact Book, 2002. The Economist Intelligence Unit, Country Profile 2003.

underdeveloped.3

When visiting several sites of major Indian and foreign firms, the

juxtaposition of the shanty-towns outside the front gate of the development clearly illustrated this income disparity.

Poor Infrastructure Due to the lacking infrastructure, successful firms have become almost entirely self-sufficient with their own generators, satellites and roads to name a few. Also, it is no surprise that the thriving export sector, IT, does not rely on the ports for shipping their goods. The

emergence of such successful enterprises proves that Indian firms are agile and innovative; however, drastic improvements to the countrys infrastructure are required before the domestic market can flourish in the same way the IT export sector has. Underdeveloped Capital Markets The Indian government has made progress in modernizing the capital markets with the recent establishment of a credit bureau, a standardized appraisal system, an improvement in lender rights with respect to default, and a more robust bankruptcy framework. However, the financial markets are not yet able to allocate capital efficiently. This inefficiency is especially apparent in the small and medium-sized enterprise (SMEs) segment. In particular, the

banking system does not have the necessary credit information on SMEs and does not have modern tools of credit scoring for SMEs.4 Additionally, since most SMEs lack

collateral or proper documentation on collateral needed to secure loans, banks generally have a highly negative view on SMEs lending.5 This inefficiency in the capital markets is

3 4

The Economist Intelligence Unit, Country Profile 2003. P. Basu, World Bank Report No. AB756 SME Financing & Development. 5 Ibid.

stifling to the development of the domestic market, as the SMEs have the greatest potential to provide high-wage employment for the 70 percent of the labor still working in agriculture.6 Steps for Sustainable Economic Development While the increased demand for IT exports has had a positive impact on the country, its effect has been isolated to specific regions and segments of the labor force. Although a vibrant industry with good growth prospects, it has only directly benefited roughly 0.01% of Indias population. It can be argued that the success in the IT sector will spill over into the domestic market as middle class buying power increases, but to sustain this, the domestic market needs to improve and offer better quality products and services to meet middle class demand.

Moreover, the most critical problem facing India is its 25% poverty rate.

The Indian

governments tenth five year plan aims to reduce this to 10%; to meet this, the economy must grow at an annual rate of 8% for the next ten years. 7 As stated above, the SME sector has the greatest chance of making an impact on the entire economy. While not a simple task and not the only areas in need of reform, improving the countrys capital markets and infrastructure will help the domestic market flourish and lessen income disparity.

Lastly, as stated aptly by one reporter: If a choice between changing global mindsets towards outsourcing from India and changing Indian mindsets towards markets has to be exercised, the latter is the more valuable option.8 India has rich natural resources and a highly educated work force with an untapped entrepreneurial spirit. Reforms in the capital markets and improvements in infrastructure will provide greater opportunities and help

6 7

Ibid. Ibid. 8 G. Ramachandran, The Hindu Business Line, May 13, 2004.

change to mindset of the population. A change in the mindset could add approximately $60 billion in annual purchasing power. This is approximately three times greater than the value created by the BPO exports.9

Conclusion While the IT/BPO export trend has helped India grow in the last decade, the domestic market still lags behind. Lessening the income gap will help address the poverty issue. A thriving SMEs sector would have a wide spread impact on the economy and help change the mindsets of the general population by giving opportunity and foster entrepreneurship. India has made great progress in sustainable development, but more work is needed to achieve its goals.

Ibid.

Outsourcings Impact on the Economy GDP Growth 2003 was a tremendous year for India. The GDP growth rate reached an impressive 8.1% compared to the prior four years: 4.6% in 2002, 5.1% in 2001, 3.9% in 2000 and 7.1% in 1999. While agriculture and industrials contributed 23% and 26% respectively, the services sector contributed approximately 50% of the GDP.
10

Within services, the information

technology (IT) sector drove Indias growth. A steady trend since the early 1990s, the IT sector has grown on average 46% per year since 1993.11 However, this growth has not, until recently, attracted the attention of the global news media. Despite the recent recession

10

The Economist Intelligence Unit, India Country Report March 2004.

in the U.S. and the resulting off-shoring backlash, the Indian services sector (largely IT) is expected to grow at approximately 9% in the next two years.12