Ruchir Sharma And Ramesh Damani Chart Out How India Can Grow Faster | NDTV Profit Exclusive

America, the land of the free has today become a place where capitalism is increasingly distorted. It makes you wonder why have they lost faith in the current economic system and what can be done about it, according to Ruchir Sharma, chairman at Rockefeller International and the author of What Went Wrong With Capitalism.

Sharma, in conversation with market veteran Ramesh Damani, spoke on India’s economic trajectory, the challenges it faces, and the opportunities ahead in an exclusive NDTV Profit interaction.

"There's no doubt that India is on the right economic trajectory." India's productivity growth has been commendable over the past few years, he said. However, Sharma acknowledged the criticism that while economic growth has been high, employment generation has lagged, leading to concerns.

"When you create high economic growth with low employment, it is naturally because of high productivity, but it leads to other consequences as well," he said.

Sharma also discussed the role of financialisation in India's economic progress. While many emerging markets rely heavily on foreign capital to drive their economies, India has developed a strong domestic market for capital flows, he said.

"India has set in motion the financialisation process where it's less reliant on foreign capital," he said. This has helped fuel the Indian stock market's growth and has led to the country trading at a premium, compared to other emerging markets, Sharma said.

A combination of the economy being on the right trajectory, earnings growth holding up and the steady flow of domestic money is what has helped Indian markets, according to him.

No other emerging market offers the same variety of sectors and stocks, Sharma said. "That's the great thing about India. There's no emerging market out there with the diversity of stocks that India has."

While India has made significant progress by embracing a market-oriented, capitalist economy over the last 30 to 40 years, the country still has a long way to go, the global investor said. 

"India is still moving in the direction of becoming more economically free. But to achieve higher growth rates, we need to adopt more economic freedom," he said, adding that the country ranks low on the index of economic freedom, which is limiting its growth potential.

Sharma also noted the importance of improving the manufacturing sector. The sector's contribution to India's GDP has stagnated around 14-15%, far below the levels achieved by successful East Asian economies, he said.

"To create mass employment, manufacturing needs to do better. We may not reach 25% GDP like some East Asian countries, but we should aim to exceed the current 14-15%," he said.

However, he pointed out that India remains a challenging place to do business. "This is still a very tough country on the ground to do business in. The kind of regulatory state, the kind of government interface you have to deal with, it's still very frustrating," Sharma said.