What will it take India to become one of the top 3 major economies in the world?

As per the opinions of the bullish economists based in India and various other renowned rating agencies spread across the world, India would require five years to become the number three world economy. Yet, it will still be 20% of China’s GDP.

India’s position in the top three world economies may look pleasing to the eyes but in fact, for a country of India’s size and calibre, India would gain too little in this long period of time. For India to do extremely well on the economic front, so that it can narrow the difference between itself and China, it needs a strong growth of five or more years of 10-12% growth rate to materially narrow the gap with its instant neighbour. For this, India may take lessons from the Chinese growth story.

China saw two major growth spurts, one in the 1980s and the other in the 2000s. It capitalised on its demographic strength pretty nicely before it introduced one child policy across China after which its population started ageing. But in 2020, it officially reversed its policy to reverse the damage made by the very policy it had implemented to check the growing population.

India has to capitalise on its demographic dividend before the nation starts officially becoming old, which is predicted to happen around 2050. This demographic time bomb may explode to derail the run of the Indian growth story on the tracks of economic development. By the time it will aim to come anywhere remotely close to China, it will lose its demographic dividend by trudging along at 7.5%.

How can India grow economically?

India is still a young country. And comparatively a cheaper destination to manufacture high-end refurb goods. It can certainly become a global manufacturing hub by backfilling some China based manufacturing units which have grown expensive with rising labour costs there. Once after having a thick presence of manufacturing units to feed the needs of its local population of continental size, India can grow its exports, improve its capital account and boost fiscal spending to improve the lives of people living in the bottom strata of society.

India’s current population is equal to the combined population of South America, North America, the European continent and Oceania. Even a strong self-reliant economy would go a long way in ensuring the growth of Indian society. A strong export based economy combined with a strong consumption based local economy would get India desired results in less than a decade from now. Buy for exports to do well, a lot depends on the consumption profile of the West, which will change with its demographics.

Also, India can only jump through hoops with leapfrogging technologies. Science and technology are the future. With a strong penetration of the internet, the behaviour of consumers has also drastically changed. People have made a shift from the offline markets to digital markets in recent years followed by lockdowns initiated by different governments worldwide.

Thanks to the pandemic infused restrictions of public mobility, consumers are now searching for better services in the comforts of their homes. Internet based enterprises have been making the lives and experiences of people better in every aspect. While they have cut out many middlemen and improved efficiency, India is still plugging the gaps by trying to create its own internet based startups. But real value creation will look very different once this cycle of US monetary tightening ends and it’ll demand innovation.

An eye on the welfare schemes

Social welfare schemes for the bottom 70% are essential for ensuring societal stability and increasing disposable incomes to stimulate low order consumption. Labour transition from farm to the factory will remain slow but industrialization will substantively raise wealth for the top 30%. With a strong manufacturing unit in place and the workers being shielded by a tightly knitted yet well thought social security net, India can narrow the growing gap between the rich and poor of the country.

Education

A nation’s growth is usually driven by the top quartile or so of the population. To equip 350 million citizens, investment is needed in education. It expands the workforce in technology, manufacturing and of course services. Without raising education budgets, India will falter. The Indian education system has been the biggest reason why the top tier population chooses to migrate outside the country for better earning and learning options.

Education is not only about building structures and expanding the existing net of prestigious institutes like the IIMs and IITs. This is important, no doubt, the government too has done a lot to improve the number of prestigious public institutions, KVs, JNVs, etc. but a lot still has to be done. The present day Marxist academia in place, inspired by the ideals of Lord Macaulay, is pushing Indians into a deep sense of inferiority complex.

Not just that, it also fills an average Indian in an English medium school with arrogance too. this not just impacts the behaviour of Indians towards their own culture but also creates roadblocks in the development of nation. Indian education system is producing arrogant clerks no matter which ever stream one comes from.

The need of time is to introduce a value based academic which would be futuristic nature. The need is to also invest a lot in teachers training and correcting the courses. Although, the National Education Policy, 2019 was a ray of hope, it’s slow implementation has ensured that Indians would eventually run out of demographic potential by the time the recommendations are implemented.

Poor urban planning

India is yet to deliver a chain of world class cities. Urban spaces are where ideas are exchanged. The current government has underinvested in urban development and that has real consequences. Brain drain can be reversed and talent held back at home if this changes. It’ll boost innovation. Urban infrastructure involves cleaning up cities, removing slums, creating walking spaces, reducing pollution, constructing sustainable buildings, ensuring flood management and making green spaces.

The list is endless. Which city does this? Clearly none. For a current $3.5 trillion economy, we deserve better. China created better urban places when they were $2.5 trillion back in 2005. Metros and land values are not the only indices of development, there are a lot more. And clearly, India is underperforming in all aspects.

A robust Health System

For a country to focus on undisrupted economic growth for a prolonged period of time, it is essential for that country to have a robust health care system in place to absorb the shockwaves of public health crisis. When a country transitions from a low income generating society to a high income making society, the nature of the diseases faced by its society also changes. Usually low income generating societies face the plague of communicable diseases and nutrition deficiency while the high income making societies are challenged by lifestyle related diseases.

Diseases such as diabetes, cancer, heart ailments etc., not just pose a challenge to society but also put enormous strain on public exchequer. A robust health care system focused at awareness, identification and treatment of diseases would help save precious wealth of the state. In the recent covid-19 pandemic, it was proven how health of society is closely linked to the financial health of the nation. And hence a good health care policy of the state will go a long way ensuring long-term wellbeing of Indians.

Another key area which should be talked more about but sadly, in India, it’s not is health insurance. In 2018, the number of people with a health insurance stood at 35%. Hopefully, due to sudden advent of a dreaded pandemic, the number of people with a health insurance must have gone up. In India, there is a popular saying- Middle class is only a medical bill away from being driven to poverty, this holds true for most of the nations.