Daily Archives: August 26, 2011
India – From Third World to Emerging Giant. Really?
As I look at modern India afresh, it is eye-opening to say the least, to witness the scope of change that has swept across the country over the past couple of decades. This is the case ever since the country opened its doors to international trade under the Rao administration in the early ’90s. So over the years of visiting India since that time, one could feel the transformation occurring. Today, what I see is really the accumulation of all that has happened in these intervening years and it’s remarkable and amazing. [In this post, I will try my best to stay away from some basic things that should have changed, but did not].
All in all, these economic reforms have made a profound and colossal impact on the country – in how people live today and in how they think about the future and in its sheer economic potential.
LEGEND: Grey:India; Dark Blue: Countries with key military, strategic and economic relations with India; Med Blue: Key strategic and economic relations; Lt Blue: Favorable Relations; Red: Border/Territory disputes with India
I recently came across an interview with an economist who put some numbers to my thoughts. As much as one may imagine they know about India’s future, these numbers were…well, mind-boggling.
The economist in question is Arvind Panagriya, a Professor of Economics & Jagdish Bhagwati Professor of Indian Political Economy at Columbia University and a Non-resident Senior Fellow at the Brookings Institution. He is also author of a book, The Emerging Giant, which was published in 2008 and described by Fareed Zakaria as the ‘definitive book on the Indian economy’.
Here are some of the points he made about India and the future of the nation in a recent interview (content of interview paraphrased below):
India will be a global Superpower in the next 15 yrs – by about 2025.
In the last eight years, India has grown about 8-9% in real rupees, which translates to about 13% in real dollars. Even if the growth is 10% a year, the economy will go from $1.7 trillion to $7.0 trillion by 2025 which will enable it to pass Germany, UK, France and Japan. India will be the 3rd largest economy, behind only China (#1) and United States (#2).
“Browning” of the globe
In the next 15 years, the world (basically the developed countries and China other than India) will be less 100 million people. On the other hand, India will be adding 130 million people in the age group 20 to 49. This means that India will actually be supplying the global work force.
What about inflation and corruption?
Inflation and corruption are issues that have plagued this country even during this past time of growth. So, while they will always have a negative impact, the projected growth rate will not suffer.
What might be some deterrents to meeting these projections?
The only real deterrent is if something unexpected happens to reverse the economic reforms that have been in place for the past two decades.
And, of course, there are innumerable things that the Government can do better.
Some of the needs of the country, according to Panagriya, include the following:
- Better education policy and opportunities, particularly in higher education
- Land reform
- Redistribution of wealth to reduce poverty
- Less government control of implementation of policies and services delivery – involving private sector more and more; the government of India simply does not have the capacity to carry out some of the more ambitious goals of the country.
Based on Panagriya’s opinions and his projections, India indeed appears to be an emerging giant. Its future appears assured and bright, whether looking at in isolation, or on the evolving global stage. And the realization of the scope of this country’s potential is only now penetrating and spreading around the world.
But. As bright as it looks in the future, the reality can differ from projections. And how! Does anyone remember Japan and the predicted glory days that ended in a crash that the country is yet to recover from? Some three decades ago, Japan was like China is today. It was a relentless growth story towards far-reaching economic progress. It was only going to be a matter of time before Japan became mightier than the US as the world’s largest economy.
Or the case of Southeast Asia – until 1997, Asia attracted almost half of the total capital inflow into developing countries. The economies of Southeast Asia attracted foreign investors looking for a high rate of return while the regional economies of Thailand, Malaysia, Indonesia, Singapore, and South Korea experienced high growth rates, 8–12% GDP, in the late 1980s and early 1990s. This was widely acclaimed and was known as part of the “Asian economic miracle”. Then came the Asian financial crisis which was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown.
What about India?
This is not to say that the same will occur in India! However, it’s prudent to mix caution with high flying projections.
In addition, it is disheartening to see some of the endemic issues that plague this country being ignored by the government. Am I sounding like a broken record about this? Well, so be it.
For example, corruption is a top-of-the-mind issue and a mighty blight that needs to be eradicated.
Here is one of the most fundamental ways that it impacts this country: The way I see it, once it is less easy to be a corrupt politician, I feel that this country can count on getting real leaders to step forward – those who are there to be of service to the citizens and country, not just to fatten their bank balances. Isn’t it past time for Indian politicians to stop treating their work as a personal business?
Until such a time that the right leadership (which is not apparent where I look) is not part and parcel of India, I must be honest, it is very, very, very hard to believe in these numbers alone.
With the right leadership, everything has a much better chance of falling into place.
As India is often touted as the largest democracy in the world, it will be up to the people to vote carefully – with a view to bringing in those leaders that can leverage potential into reality, assuring a bright future for them and their descendants.
India Foreign Relations Map: By User:SpartianSpartian at en.wikipedia or Deepak Gupta at Wikimedia Commons. User:Spartian with changes by User:Emperor Genius [Public domain], from Wikimedia Commons