Modern day global power
India's growth is expected to accelerate to 7.3 per cent in 2018, noted the Global Economic Prospects report
India is expected to overtake Britain and France to become the fifth largest in the world in dollar terms in 2018
Published: Fri 26 Jan 2018, 2:29 PM
Last updated: Sun 28 Jan 2018, 4:40 PM
The India of more recent years is a vastly different place, and it interacts with the world in very different ways, writes Alyssa Ayres in her latest book Our Time Has Come. It's true. If the India of the 80s and before was a place that attracted the spiritually hungry, adventurous tourists, and academics, today the South Asian tiger is attracting investment bankers, businesses and anyone who wants to be a part of the growing market. The country is among the fastest-growing large economies in the world, with an average gross domestic product (GDP) growth of 7.1 per cent for the 2000-2016 period. And now, India is gearing to regain its status of the fastest growing large economy by next year as per the World Bank and other institutes of repute globally.
India's growth is expected to accelerate to 7.3 per cent in 2018, noted the Global Economic Prospects report released by the World Bank earlier this month. In fact, the county is on track to become the world's third-largest economy at market exchange rates over the next 15 years. It is expected to overtake that of Britain and France to become the fifth largest in the world in dollar terms in 2018, and third largest in 2032, notes the World Economic League Table (WELT).
"In all likelihood, India is going to register higher growth rate than other major emerging market economies in the next decade. The big picture for India is telling us that it has enormous potential," Ayhan Kose, Director, Development Prospects Group, World Bank, told Press Trust of India in an interview.
The growth trajectory has been pretty impressive over the last few years, and the pace of growth has benefitted people. There are many factors that have worked in India's favour, and then there are many that are hindering growth.
First let's look at the positives. The rising economic rate of growth to more than 8 per cent in the mid-2000s, and over 10 per cent by 2010, created more opportunities for people and helped more than 160 million move out of abject poverty from 2004-05 to 2011-12, reveals data from the World Bank. The middle class population, too, swelled, and so has its spending power, which will further add to the growth of the country as it increases demand and domestic consumption. As per a McKinsey report, the middle class in India could balloon to nearly 600 million by 2025.
Today, it would be hard to find a major corporation without deep stakes in India. Top executives of large and small firms are keen on expanding in India, and interacting with the young population here whose median age is about 27.9 years. This number simply means that half of the population of India is younger than this age and half is older. This kind of demographics alone makes India a vibrant and a dynamic place, especially when compared with a host of developed and developing economies whose median age of population is older than India's. In Japan, for instance, the median age is 47.3 years, Germany (47.1), France (41.4), U.K. (40.05), U.S. (38.1), China (37.4), and Brazil at 32 years. And with a literacy rate of around 75 per cent, India's population is qualified well for employment in different sectors. As per several industry estimates about one million enter the job market every month, but all are not able to find work because of the lack of opportunities.
The Indian government's latest move to further liberalise foreign direct investment norms in key sectors such as aviation, defence, single brand retail, power, etc., would do well to encourage global players to look at India more seriously.
The present Indian government under Narendra Modi has been making some right noises and moves for the economy but we are yet to see sustained positive results from the same. For instance, Modi government needs to be credited for implementing the Goods and Services Tax last year, which integrated the whole country. The GST Council is still working to iron out issues and change tax slabs, which is fine. In fact, it is natural to have teething issues when changes as monumental as this are implemented. But the government needs to seriously chart out a plan to decrease the number of slabs and make GST as a single tax rate regime, which will greatly benefit the economy.
Moreover, Modi government has successfully launched a few key initiatives such as the Make in India, and Digital India, but much needs to be done on these fronts than just lip service. Manufacturing has long been the Indian economy's Achilles heel. Unlike, in China, South Korea and Thailand, where manufacturing accounts for about 30 per cent of the economic output, India has severely lacked in expanding its manufacturing base. A traditional manufacturing sector like textiles contributes two per cent to GDP but employs about 45 million people.
The services sector, on the other side, is the largest in the country but hasn't been able to generate a large-scale employment as needed in a populous country such as India. Data from the government of India shows that IT and IT-enabled services industries contributed 9.3 per cent to the Indian GDP in 2016, and yet the sector employs only 3.7 million people. A clear policy and action for Make in India could do a world of good to the economy and the unemployed youth in the country. The implementation of GST will help in building a stronger manufacturing sector as a national common market makes it much easier to transport goods within the country. But much more needs to be done before automation kicks in.
India is well on its path to become a modern day global power and it has inched its way already into the top tiers of global economic relevance. Its biggest positive at this point is its demographic dividend and its soft power of democracy, which ironically is also its weak point. If the country can manage to tackle its domestic issues, and commit to ensure more investments in infrastructure, creating more opportunities for its youth, encourage entrepreneurship and ease of doing business, it can deliver more than what is expected. The tide is in favour of India, and now it is up to the captain of the ship to see if they can make good use of this opportunity. A majority of the world certainly trusts it more than the other rising powers, and they are waiting to see if India can deliver.