,India will be the fastest growing major economy in the world in 2023. – International Monetary Fund, December 2022.
“India will drive a fifth of the world’s expansion this decade.” – Morgan Stanley, January 2023.
“Don’t bet against India – New Delhi is making a comeback.” , Foreign Affairs Magazine, February 2023.
The outlook for major Western economies is forecast to be bleak over the next decade. And China is grappling with a number of concerns such as COVID-19 management, dwindling population, and strained geopolitical ties. But India, with its growing consumption, young demographics and quest to become a $10 trillion The economy through 2035 continues to garner positive headlines. Its growth story coincides with the year of the G20 presidency, situationally elevated geopolitical stature amid Russia’s invasion of Ukraine, and continued escalation between the US and China.
Prime Minister Narendra Modi has urged the country to move towards becoming a developed nation in the next 25 years. Government continues to lead spending in infrastructure development with proposed capital expenditure Rs 10 lakh crore for FY2024.
lessons from the past
At large, global capital, political leadership, Indian industry and citizens look to India to make their dreams come true. The government claims that there has never been a better alignment of factors in favor of India’s interests. So, is India’s prime time here? Can we leave behind the challenges of our size, scale and decades of poor performance in GDP growth to move to the next level of prosperity? While the answer is anyone’s guess, this is not the first time that India has been hyped to be the leading light of global growth.
In the mid-1990s, the world projected India as an ideal manufacturing hub, but a culture of red tape and a sluggish political economy gave the opportunity to China. During the global financial crisis of 2008–09, the country gained a strong momentum under Prime Minister Manmohan Singh (as of today). while the western world faced Lehman Brothers crisisIndia emerged as a fundamentally strong economy, with an aim to accelerate exports and infrastructure lead. But instead we created a pile of bad loans and non-performing assets (NPAs), which followed a stressed banking sector for decades.
In 2014, with the advent of Modi, India expected a Ronald Reagan and Margaret Thatcher moment of pro-industry reforms. The BJP government, however, failed to deliver in the areas of land, labor and agriculture; Eventually the economy came to a halt with his demonetisation decision.
So, whenever India’s growth story has developed, either our political and policy leadership or our cultural lack of long-term thinking has managed to capitalize on the opportunity. The country’s working age (15-64) population is expected to exceed 900 million in 2023. A mere 1 percent drop in GDP causes a loss of approx. 40 lakh jobs, A growth rate of over 7 per cent is a non-negotiable requirement to keep its working population employed. Unlike in the past, we cannot ignore the present opportunity. There are valuable lessons from the past that we should heed.
sell improvements
Ready-to-wear garments are produced for export 40 percent It is more expensive in India than in Bangladesh, which is now the world’s second largest garment exporter. India appears to have all the ingredients for success including demand, design, raw materials, but archaic labor laws prevent manufacturers from achieving scale.
Similarly, while more than 60 per cent of our population is still engaged in agriculture, their Contribution About 17-20 percent of GDP, which means that the per capita income for this population is very low. Due to the lack of reforms, farmers have small land holdings, and cannot take advantage of any economies of scale.
Indian political economy can be broadly described as ‘inherently populist, rarely liberal’. Economically liberal ideas and reform agendas are rarely implemented, but major public policy and spending flow into populist schemes.
The term socialist is part of India’s constitutional preamble and it is a general understanding that as a society, we prefer a pro-poor and anti-rich outlook, in which the rich are considered evil. The country’s economy has seen significant reforms only when the government has its back to the wall. First set of reforms arrived 1991 with foreign reserves of only a few days, and then in 2001 Under the NDA government, which inherited the recession. Reforms usually come late and do not yield immediate electoral benefits. Hence, political parties do not sell them and cater to populist voices. ‘with the poor’ To resonate with the common citizen.
Unfortunately, there is no shortcut to a country’s long-term economic prosperity, and it has to follow the path of reforms. While Modi has intended to implement reforms over the past eight years, he lacks the finesse and last-mile credibility to implement them. This was seen recently with the much-needed agricultural reforms, which were vital to India’s economy as well as the nutritional needs of its citizens. But the government lacked the clinical skills to convince all the stakeholders and polarized the subject by making it a pariah for years to come.
PM Modi currently relies on more political capital than any prime minister has experienced in the past decade. He seems to work with a non-permeable Teflon coat, and ties up with the nation to sell the idea of reforms to the public. We need him to raise his bar, avoid missing out on polarizing trends, and leverage his deep political resources to build a pro-reform public mind.
address the basics
India has the biggest gap between rich and poor. Nowhere are the super rich growing faster than in India as they control 22 percent of national income (versus 14.8 percent in China). In the past decade, the Indian stock market has generated wealth of over Rs 105 trillion, but of which Rs 85 trillion has been generated by only 12 companies. Such concentration of wealth at the top is characteristic of low-development and low-trust societies such as ours, and can be compared to countries such as Mexico and Brazil.
On a more related front, the size of India’s consuming middle class is quite small. While there is a great debate over the actual size, the latest bench The research projects that only 66 million, or 5 percent, Indians would meet the global purchasing power criteria to be called the middle class. This population is heavily concentrated in urban agglomerations and represents a true addressable market opportunity for modern consumer businesses. Much of the country’s 72 per cent rural population has increased access to cell phones and home appliances. But there is an unprecedented mismatch of their academic skills with demand.
About this 54 percent Indians in the age group of 20-29 are currently unemployed as the growth of the manufacturing sector has stagnated, and these youth lack the skill sets to participate in the service sector. Another fault line is the participation of women and minority groups, which has been very low. Due to discriminatory barriers at the workplace, only 9 percent of Indian women participate in formal jobs. bloomberg news, Similarly, while over 14 per cent of the country’s population is Muslim, they account for Only 2.6 percent have corporate roles and a low level of per capita income.
We often draw parallels with China, and it is important to note that while overspending on infrastructure initiatives is now beginning to have a negative impact on its economy; The big consuming middle class has emerged as its real asset. The ‘Make in India’ campaign aimed to achieve manufacturing as 25 per cent of GDP, but managed to achieve only a 17.4 percent share in 2020, which is not much better than the 15 percent share in 2001.
Experts argue that India’s growth will get better momentum from Service and specialty manufacturing compared to traditional industrialization such as China. It becomes valid as the service economy has taken off 50 percent Another 10 per cent year-on-year growth of our GDP.
Top level concentration of wealth, small size middle class, lack of employment rural youth, and the under-representation of women and other marginalized groups – all intertwined. If we do not address these issues, we will block the growth of India’s middle class. This in turn would lead to the accumulation of more and more wealth by the few at the top.
Despite the Indian government’s impressive performance in physical and digital infrastructure projects, its investment and focus on skill development and middle class expansion initiatives has been disproportionate. To avoid few winners and many losers, and to unleash the potential for our population size—we need labor force engines of rural youth, women and minority groups.
The author works on the expansion of e-commerce in emerging countries, writes on global economics and politics. Thoughts are personal.