In January 2015, when Prime Minister Narendra Modi laid out his plans to transform India into a $20 trillion economy from a $2 trillion one currently, the idea was perceived by many as a bit too ambitious. While Modi promised reforms in areas such as taxes and subsidies in addition to transparency and efficiency in governance and said setting up of the National Institution for Transforming India (NITI) Aayog is just one of institutional reforms that will unfold, critics cited the country’s huge reliance on agriculture, which in turn depends of the vagaries of the monsoon, inadequate infrastructure, which continues to be in shambles and high levels of corruption as factor that will thwart the very purpose of painstaking reform measures.
However, just a month later in February PwC in its ‘World in 2050’ report said India, along with China, will be the world’s leading economy by 2050, while Japan, South Korea and Australia will slip in terms of rankings among top global economies. According to the report, India’s economy will surge to $17 trillion in 2030 and $42 trillion by 2050, claiming second place ahead of the US (which will touch $41 trillion) and will comfortably overtake the EU and the US in share of world GDP (in PPP terms) by 2044 and 2049, respectively. PwC also said India’s economy will expand by an average annual rate of 6.4 per cent from 2014 to 2020, remaining faster than China after 2020 due to its younger population and a greater scope for catch-up growth.
This perspective was echoed by Subhash Chandra Garg, World Bank’s executive director for India, Bangladesh, Bhutan and Sri Lanka, who said India has the potential to become a multi-trillion dollar economy with a per capita income of about $40,000 by 2050.
India currently enjoys three major economic attributes that are also seen as factors that will provide a leg-up in the country’s journey to a global economic powerhouse—favourable demographics, its status as one among the world’s largest democracies and a preponderance of English speakers, which helps ease business dealings with the West.
Among these, demographics is especially seen by many as a significant factor—the country will soon dwarf the rest of the world when it comes to its working age population—people between 18 and 65 who are contributing members of society. Compared to North America, Japan and even China, India is an exceptionally young country. The majority of its population is less than 30 years old and by 2020 the average age will be 29, compared to 45 in Western Europe and 48 in Japan.
But is transforming India to a $42 trillion going to be a cakewalk? Even the most euphoric sympathisers of Modi wouldn’t think it is. For one, to reach a size of $20 trillion by 2030 and $42 trillion by 2050, India will have to grow at 7 seven per cent annually for the next 30-35 years, which seems unlikely. Besides, India’s growth would require sustained economic reforms and increased investment in infrastructure, institutions and mass education. The country will also have to transform its agriculture completely, grow its services and manufacturing sectors and give a boost to tourism.
A key challenge will be to get people out of agriculture and use them in the manufacturing and services sectors, while also ensuring that agricultural production in the country increases. Improved prospects of infrastructure will especially remain crucial to ensure the ‘Make in India’—which is aimed at attracting businesses and investors from around the globe to transform the country into a key global manufacturing hub—will be a success.
Also the services sector need to be further strengthened—the percentage of the population working in the services sector needs to be enhanced significantly from 55 per cent currently.
No growth prediction can skip the role of railways, the largest employer in the country. Railways can boost India's GDP by 3 per cent if the government manages to expand the rail network by 40,000 kilometers.
Along with eradicating corruption, which has emerged one of the largest crippling factors that damage any reform measure, efforts are also needed to eliminate bureaucratic red-tapism and slow decision making. To achieve this, Modi’s idea of ‘more governance; less government’ should be implemented religiously.
Attracting foreign capital will continue to remain one of Modi’s key challenges in leapfrogging India as a top global economy. Besides enhancing reform initiatives, cleansing the image of India as an increasingly intolerant regime when it comes to ensuring religious plurality and freedom of expression, too will be crucial.
Committed and sustained policy and economic reform initiatives to enhance IT, telecom, education and healthcare will also be crucial to transform India first to a $20 trillion economy by 2030 and eventually to a $42 trillion one by 2050.
However, just a month later in February PwC in its ‘World in 2050’ report said India, along with China, will be the world’s leading economy by 2050, while Japan, South Korea and Australia will slip in terms of rankings among top global economies. According to the report, India’s economy will surge to $17 trillion in 2030 and $42 trillion by 2050, claiming second place ahead of the US (which will touch $41 trillion) and will comfortably overtake the EU and the US in share of world GDP (in PPP terms) by 2044 and 2049, respectively. PwC also said India’s economy will expand by an average annual rate of 6.4 per cent from 2014 to 2020, remaining faster than China after 2020 due to its younger population and a greater scope for catch-up growth.
This perspective was echoed by Subhash Chandra Garg, World Bank’s executive director for India, Bangladesh, Bhutan and Sri Lanka, who said India has the potential to become a multi-trillion dollar economy with a per capita income of about $40,000 by 2050.
India currently enjoys three major economic attributes that are also seen as factors that will provide a leg-up in the country’s journey to a global economic powerhouse—favourable demographics, its status as one among the world’s largest democracies and a preponderance of English speakers, which helps ease business dealings with the West.
Among these, demographics is especially seen by many as a significant factor—the country will soon dwarf the rest of the world when it comes to its working age population—people between 18 and 65 who are contributing members of society. Compared to North America, Japan and even China, India is an exceptionally young country. The majority of its population is less than 30 years old and by 2020 the average age will be 29, compared to 45 in Western Europe and 48 in Japan.
But is transforming India to a $42 trillion going to be a cakewalk? Even the most euphoric sympathisers of Modi wouldn’t think it is. For one, to reach a size of $20 trillion by 2030 and $42 trillion by 2050, India will have to grow at 7 seven per cent annually for the next 30-35 years, which seems unlikely. Besides, India’s growth would require sustained economic reforms and increased investment in infrastructure, institutions and mass education. The country will also have to transform its agriculture completely, grow its services and manufacturing sectors and give a boost to tourism.
A key challenge will be to get people out of agriculture and use them in the manufacturing and services sectors, while also ensuring that agricultural production in the country increases. Improved prospects of infrastructure will especially remain crucial to ensure the ‘Make in India’—which is aimed at attracting businesses and investors from around the globe to transform the country into a key global manufacturing hub—will be a success.
Also the services sector need to be further strengthened—the percentage of the population working in the services sector needs to be enhanced significantly from 55 per cent currently.
No growth prediction can skip the role of railways, the largest employer in the country. Railways can boost India's GDP by 3 per cent if the government manages to expand the rail network by 40,000 kilometers.
Along with eradicating corruption, which has emerged one of the largest crippling factors that damage any reform measure, efforts are also needed to eliminate bureaucratic red-tapism and slow decision making. To achieve this, Modi’s idea of ‘more governance; less government’ should be implemented religiously.
Attracting foreign capital will continue to remain one of Modi’s key challenges in leapfrogging India as a top global economy. Besides enhancing reform initiatives, cleansing the image of India as an increasingly intolerant regime when it comes to ensuring religious plurality and freedom of expression, too will be crucial.
Committed and sustained policy and economic reform initiatives to enhance IT, telecom, education and healthcare will also be crucial to transform India first to a $20 trillion economy by 2030 and eventually to a $42 trillion one by 2050.
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