The Globe Has Tilted. India Has Opportunity To Shape Economic Agenda
India has underperformed its potential. But at 75 it is finally exhibiting some characteristics of a developed economy. Better days are ahead. The West is embracing the world's fifth largest, pertinently wooing a ‘high growth’ economy, that has paved a long runway for itself.
India’s prominence has also been aided by the West’s disenchantment with China. The USA now sees China as a competitor, not a collaborator. The other western economies are threatened by China’s political ambitions. They are prioritising political stability over trade.
The global economy is slowing, breathing hard. Receding in some geographies
The globe has tilted.
The comradeship between India and the United States has never been as thick, nor deeper. The USA sees India as an essential collaborator and recognises it as an able foil to China.
Productivity and consumption have been ebbing across the western economies. The emerging markets have not recovered adequately from Covid-19. The Ukraine-Russia battle has cast its shadow on the Eurozone and is hurting its economy. It’s likely to linger. The vicious cycle of lower consumption, slowing growth and dipping investment in Europe will have significant spillover effects, but the underlying structural factors run even deeper. The ripple effect is beginning to be felt across the world and is reminiscent of what happened to Japan in the 1990s.
A salesman and a statesman. PM Modi wears two hats. Both fit well
The government has walked well and firmly, and is on the right path, leading the narrative on several forums. A seasoned diplomat is fronting India’s increasingly assertive foreign policies. It’s often antagonistic to China, but equally opposed to the concept of a US-led global order. An India that is politically stable and growing has manoeuvring space on most high tables. Most nations see India as a better alternative to China.
On the commerce front, the country has laid out favourable tariffs and concessions to woo industry, conceding the battle to win the war. India’s large and thriving consuming class may even be a bigger magnet. The West sees India as a big and growing market, some come to sell, the others are negotiating terms to bring in capital and invest for the long haul.
India not only boasts the largest, but the most influential diaspora in history. The 30 million global ‘ambassadors’ have demonstrated and delivered more for their country than any other group. They are model citizens, and their successes enhance India's image. Many of them play a role in ‘pushing’ investments into and expanding exports from India. They act as a vital "bridge" to access knowledge, expertise, resources, and markets for India. They are an integral part of India's ‘soft diplomacy’ fostering crucial links between their adopted nations and their places of birth. India received remittances of over USD 100 billion, around three per cent of the country's GDP. The intangibles are many times more.
India has grabbed the baton. In a bright spot
The confidence in India, and its allure is also because of its demographic advantage. Its workforce will continue to expand till the late 2040s. In contrast, China is ageing, and its once famed and fierce assembly line is contracting. The European Union is way past that and is facing consumption contraction too. A Crux study highlights that the increase in labour supply contributes about 1.5 per cent to India’s growth rate, and is likely to do so for the next decade.
Demography supports India’s vision to ‘serve’ the globe, even emerge as the knowledge capital of the Eastern world. The services sector contributes 55 per cent to the GDP and is a significant export driver. Information Technology and telecommunications have transformed the landscape and created opportunities such as ecommerce, and attracted a new breed of Indian tech-preneurs, with global ambitions.
India’s generational ambition and decadal effort to ‘make’ for the world is finally bearing some fruits, even though this is still at the beginning of the curve.
Economic prominence, yet relatively impoverished for the next two decades.
Our per capita income will grow, piercing the inflection point for over 50 per cent of the people. But a fifth of the population will be deprived of the virtues of growth momentum. We are a generation away from providing a life of dignity to the bottom 15 per cent, particularly marginal farmers and the oft-ignored and largely forgotten urban poor.
Policymakers need to address other challenges too. Our complex administrative framework needs an overhaul. Similarly, the much-talked-about and anticipated judicial reforms are long due. India needs to reinforce and remodel its institutions, even build new ones. India of the 21st century cannot be governed by 20th-century institutions.
The Crux study highlights that infrastructure growth has been rapid, but is not done yet. An insight from the study is that the ‘continuity’ of growth is dependent on how rapidly the infrastructure and other enables are ‘laid’ out, indicating that India will be infrastructure deficient for the next two decades.
The study also highlights that while the ‘macro’ is in place, it’s the ‘development and enablers’ on the ground that catalyse growth. The municipalities, the tehsil and the local bodies lack the structural framework to drive economic growth, often perceived to be the growth bottleneck. Our regulatory framework is restrictive. Inspector Raj is rampant.
GDP is not the right indicator of growth
Prime Minister Modi’s ambitious goal of achieving high-income status by 2047 is laudable. Doable. However, we must aim beyond the GDP ‒ and higher. A 15 trillion-dollar economy in 25 years is not a real indicator of development.
Growth must usher in substantial and sustainable social-economic mobility for the poor and stimulate holistic progress for most others Addressing growing inequalities is imperative. Quality of living is real development. Health is a multiplier. Education is empowering. Equality of opportunity reinforces faith in the system.
He must exploit the opportunity and make a difference in the lives of millions. And for generations.
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