A Game-Changing Era

The next quarter-century will be crucial for the world’s fifth-largest economy on the cusp of scripting a repeat of history to reclaim its status as the second-largest economic power after China


Issac John

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India's Prime Minister Narendra Modi addresses a gathering during the inaugural session of Vibrant Gujarat Global Summit 2024, in Gandhinagar on January 10, 2024. — AFP
India's Prime Minister Narendra Modi addresses a gathering during the inaugural session of Vibrant Gujarat Global Summit 2024, in Gandhinagar on January 10, 2024. — AFP

Published: Fri 26 Jan 2024, 3:20 PM

The world's most populous nation celebrates a monumental milestone in its journey as a sovereign republic with the themes of ‘Viksit Bharat’ and ‘Bharat — Loktantra ki Matruk,’ both vividly encapsulating a future-ready nation’s sky-high development goals and global leadership aspirations.

Over seven decades of a roller-coaster but storied past, India’s spectacular growth in various sectors has been nothing short of an incredible feat, having navigated a multitude of challenges, disasters, and wars to position itself as a potential economic superpower and the world’s fourth-largest military power on the cusp of a game-changing new era of turbo-charged growth propelled by technology and innovation.

The next quarter-century, envisioned as Amrit Kaal or “The Era of Elixir” for the nation, will be crucial for the world’s fifth-largest economy on the cusp of scripting a repeat of history to reclaim its status as the second-largest economic power after China — an unrivalled position it enjoyed four centuries ago.

However, as some analysts believe, with China’s economy slowing, the main engine of growth in Asia-Pacific will move away from the world’s second-largest economy to South Asia and Southeast Asia, led by an unstoppable India.

The world’s fastest-growing large economy’s much-vaunted aspiration to regain its past glory resonates with Prime Minister Narendra Modi’s “guarantee” while pitching for his third term that the country would become one of the top three economies in the world.

“You all know that in the last 10 years, India has risen from 10th economic power to Number 5. Now, I have given a guarantee to my countrymen that India will be among the world's top three economies in my next five-year term.” The Prime Minister said that due to the government's pro-poor policies, 25 crore people have been able to come out of poverty in the last 10 years. He added that it was important for India to be self-reliant to be a developed country.

Modi’s assertion aligns with the aspiration voiced by the first Prime Minister of India, the late Pandit Jawaharlal Nehru, in his famous speech ‘Tryst with Destiny’ delivered to the Indian Constituent Assembly on the eve of India’s independence. He had said: “The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity.” This is an interesting remark that captures not only the essence of the vision of the framers of the Indian constitution but also reveals the key to building a truly great nation.

As Prime Minister Modi envisaged, the coming 25 years of Amrit Kaal would restructure all fragments of the Indian economy through rapid profitable growth, better living conditions for all, infrastructural and technological advancements, and re-awakening the world’s trust in India. The Panch Pran or the five fundamentals of Amrit Kaal include the goal of developing India, elimination of any trace of the colonial mindset, honour and pride in our roots, development of unity, and a sense of duty among citizens.

The Reserve Bank of India (RBI) Governor Shaktikanta Das has said that India’s growth momentum is likely to be maintained in the coming years helped by the structural reforms undertaken over the past years and due to the macroeconomic and financial stability.

Speaking at the annual meeting of the World Economic Forum at Davos, Das said that this is an opportune time for investors to invest in India.

India's economy will reach the $10 trillion mark by the end of this decade, World Economic Forum President Borge Brende has predicted. Brende expressed confidence in the Indian economy's growth trajectory, emphasizing its potential to join the ranks of the world's largest economies.

"We think, in the coming decade, we can be speaking about a $10 trillion economy, at least in the coming two decades," Brende said, reflecting on India's economic prospects amidst global slowdown and geopolitical tensions.

The WEF president acknowledged India's rapid growth in the digital economy, which is expanding twice as fast as the rest of the economy, positioning the nation favourably on the global stage. "India has been at the forefront due to the digital economy and the export of services. This is a very sweet spot for India. "But, of course, reforms should have to continue in India. Reforms related to education, funding, and reforms to tackle unnecessary red tape should continue. I feel there is an understanding of all these things in New Delhi," Brende added.

According to World Bank projections in January, India is anticipated to maintain the fastest growth rate among the world’s largest economies, but its post-pandemic recovery is expected to slow, with estimated growth of 6.3 percent in 2023-24 financial year.

"Growth is then expected to recover gradually, edging up to 6.4 per cent in FY2024/25 and 6.5 per cent in FY2025/26. Investment is envisaged to decelerate marginally but remain robust, supported by higher public investment and improved corporate balance sheets, including in the banking sector," World Bank Global Economic Prospects report January 2024 says.

According to S&P Global, India’s GDP for the fiscal year ending March 2024 is predicted to hit 6.4 per cent, which is higher than its previous forecast of six per cent. Economists argue that the macro challenge for India is to turn traditionally uneven growth into a high and stable trend. Given structural differences with East Asian economies, India will need to follow its unique path.

“Capital accumulation will drive India’s economy toward this desirable path, with the government and, increasingly, the private sector investing in infrastructure and manufacturing. Digital infrastructure is another potential driver of high growth.

“Success will ultimately depend on India’s ability to reap its demographic dividend; increase labor force participation, including upskilling; boost private investment, with structural reforms in land, logistics, and labor; and increase competitiveness, driven by foreign direct investment. Geopolitics could provide considerable tailwinds,” Paul Gruenwald, global chief economist at S&P Global Ratings, said in a report.

Capital accumulation will be the dominant driver of Indian growth. Investment as a proportion of GDP reached a 10-year high of 34 per cent in fiscal 2023. The government has played a key role in boosting investment by offering substantial support for infrastructure projects and by incentivizing manufacturing. We expect the Indian private sector to gradually increase investments given healthy corporate balance sheets.

The Indian consumer market will more than double by 2031, surging to $5.2 trillion from $2.3 trillion in 2022. This rapid expansion reflects a growing population and increasing household incomes. Consumer spending on food will rise to $1.4 trillion by 2031 from $615 billion in 2022. Spending on financial services will climb to $670 billion from $280 billion. Higher per capita incomes will also likely boost discretionary spending in areas such as entertainment, communications, restaurants, and hotels.

Services’ share of GDP will continue to rise, along with manufacturing. Gains for services will be fuelled by exports in information technology and IT-enabled services, along with domestic sectors such as retail, food services, trading, finance and healthcare. The question is whether India can generate employment and productivity growth from services at levels similar to those once achieved by manufacturing countries in East Asia.

To sum up, India's transformative journey in the next quarter-century will presents exciting opportunities just as well as posing a multitude of challenges.

A worker checks wheel sets at the Integral Coach Factory in Chennai. — AFP
A worker checks wheel sets at the Integral Coach Factory in Chennai. — AFP

Remarkable Achievements

Economic Growth: India's economic growth has been impressive, with an average annual GDP growth of seven per cent over the past two decades. It has become the world's sixth-largest economy and is projected to surpass the United States as the second-largest economy by 2050.

Technological Advancements: India has emerged as a global leader in the IT and software services sector. The country's skilled workforce and entrepreneurial spirit have fueled the growth of numerous tech startups, making India a hub for innovation and technology.

Space Exploration: India's space program, exemplified by the Indian Space Research Organisation (ISRO), has achieved significant milestones. The successful Mars Orbiter Mission and the Chandrayaan-2 lunar mission have showcased India's capabilities in space exploration.

Infrastructure Development: India has made substantial progress in infrastructure development, including the construction of highways, airports, and ports. The government's flagship initiatives such as the Bharatmala project and the Sagarmala project aim to further enhance connectivity and boost economic growth.

How will India's transformative journey unfold in the next quarter century

Economic reforms: India's transformative journey will require continued economic reforms to attract foreign direct investment, improve ease of doing business, and promote inclusive growth. Emphasis on sectors such as manufacturing, renewable energy, and digital technologies will be crucial for sustained economic development.

Skilling and education: Investments in skilling and education will be vital to harness India's demographic dividend. Strengthening the education system, promoting vocational training, and fostering innovation in renewable, sustainable agriculture practices, and efficient waste management will be essential for long-term growth.

Digital transformation: India's digital transformation will play a pivotal role in its journey towards becoming a global economic superpower. Expanding internet connectivity, promoting digital literacy, and leveraging emerging technologies such as artificial intelligence and blockchain will drive innovation and enhance productivity.

What are the exciting opportunities beckoning the country

Demographic advantage: India's young and dynamic population presents a significant opportunity for economic growth. By investing in education, healthcare, and skill development, India can harness its demographic dividend and create a productive workforce.

Innovation and entrepreneurship: India's vibrant startup ecosystem has the potential to drive innovation and create employment opportunities. Encouraging entrepreneurship, providing access to capital, and fostering a supportive regulatory environment will further fuel the growth of startups and promote innovation.

Global trade and investment: India's strategic location and growing consumer market make it an attractive destination for global trade and investment. Strengthening trade ties with major economies, signing free trade agreements, and improving ease of doing business will enhance India's position in the global economy. However, as most economists point out, going forward, the nation of 1.44 billion has to surmount a spate of challenges including:

Income Inequality: India faces the challenge of addressing income inequality and ensuring inclusive growth. Policies that focus on reducing poverty, improving access to healthcare and education, and bridging the urban-rural divide will be crucial in creating a more equitable society.

Infrastructure Development: Despite significant progress, India still faces infrastructure gaps in sectors such as transportation, energy, and healthcare. Continued investment in infrastructure development, along with efficient project implementation and maintenance, will be essential to support sustained economic growth.

Social and Cultural Divisions: India's diverse society presents challenges in terms of social and cultural divisions. Promoting social cohesion, fostering inclusivity, and addressing issues related to caste, religion, and gender will be crucial for building a harmonious and united nation.

India's new journey from its 75th Republic Day to its 100th anniversary as a sovereign republic holds immense potential for growth and development. By focusing on economic reforms, skilling and education, sustainable development, and digital transformation, India can continue its trajectory as an emerging economic superpower. However, it must also address challenges such as income inequality, infrastructure development, and social divisions to ensure inclusive and sustainable growth. With the right policies and concerted efforts, India can achieve remarkable milestones and become a global leader in the 21st century.

— issacjohn@khaleejtimes.com

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