By P Mohan Chandran
Is the world on the brink of an economic renaissance, a return to the old normal where India once reigned as the world's largest economy? What are the prospects, challenges, and strategic pathways that could lead India to overtake the U.S. economy? How will the dance of demographics, technology, globalization, and policy reforms shape India's economic destiny?
I. The Historical Perspective: A Glimpse into the Past
A. The Economic Historian's View
According to the late economic historian Angus Maddison, India was the world's largest economy for an astonishing one and a half millennia. China surpassed India by 1820, but the two remained dominant until 1870. The Industrial Revolution and European colonization shifted the balance, leading to Britain and then the U.S. emerging as economic superpowers.
II. The Asian Resurgence: China's Rise and India's Potential
A. China's Economic Trajectory
With an economy already 70% of the U.S. and growing at more than twice the latter's rate, China is poised to become the world's largest economy between 2035 and 2040.
B. India's Economic Promise
The debate now shifts to whether and when the Indian economy will surpass the U.S.'s. With a sustained real GDP growth rate of 8% for 15 years preceding COVID-19, and prospects of maintaining this momentum, India could overtake the U.S. by 2073.
III. India's Economic Levers: Factors Fueling Growth
A. The Productivity Gap
India's GDP per capita is less than 20% of China's and 5% of the U.S.'s. This gap offers vast opportunities for catch-up growth through capital accumulation, skill development, and technology adoption.
B. The Demographic Dividend
India's young and large population offers three advantages: a larger workforce, higher savings and investment, and greater energy and innovation. However, raising labor participation, especially among women, and improving education are vital.
C. The Power of Scale
India's status as the world's most populous country confers benefits through economies of scale. Examples include the digital payments infrastructure built on Aadhaar and the UPI platform, expressways, railway and air connectivity, and supply chains.
IV. The Road Ahead: Challenges and Strategies
A. Reducing Trade Protectionism
India must embrace globalization by rolling back tariffs, striking free trade deals, and cutting back on anti-dumping measures.
B. Privatization and Tax Reform
Swift privatization of public sector enterprises, especially banks, and tax reform are essential to foster growth.
C. Reviving the Spirit of 1991 Reforms
India must deepen and widen the liberalization, privatization, and globalization reforms initiated three decades ago.
India's Economic Odyssey & the Global Landscape
What does India's economic journey signify for the world? Can the nation harness its demographic potential, technological prowess, and policy reforms to reclaim its historical economic prominence? What lessons does India's odyssey offer to emerging economies? And as we ponder the future, what are the moral imperatives, social responsibilities, and global partnerships that must guide India's ascent?
India's economic odyssey is a tapestry of ambition, resilience, and transformation. It's a narrative that transcends numbers and charts, resonating with the aspirations of a young nation eager to shape its destiny.
As we stand at the crossroads of history, do we see the contours of a new global economic order? Can India's economic resurgence redefine the paradigms of growth, equity, and sustainability? And as we navigate the complexities of geopolitics, technology, and human potential, what wisdom, values, and vision will light our way?
The answers lie in the unfolding story of India's economy, a story that invites us to reflect, to engage, and to imagine a world where the echoes of the past resonate with the promise of the future. It's a journey that beckons us to explore, to question, and to dream.
Do you believe India can surpass the US in economic growth?
A. Yes, with demography & technology, India can beat the US.
B. No, a host of policy reforms need to be initiated first.
© 2023. P Mohan Chandran. All Rights Reserved.
10082023
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