Indian Economy”s Graph: Rising To Touch The Sky [RECOMMENDED]

Posted on December 20, 2010 in Business and Economy

By Pushkal Shivam:

‘The empires of the future are going to be the empires of the mind’ – Winston Churchill

Winston Churchill loathed India and predicted its doom in the absence of the British Raj. Ironically, 63 years after India’s Independence from the British colonial rule, his words can be quoted to articulate the narrative of India’s stellar economic performance. That an Indian went on to become the richest man of Britain, ridicules the thesis of the merchants of doom.

Last fiscal year — at a time when world’s largest economy grew at -2.4%–India registered a growth of 7.4% which was only next to China’s 10% mark. According to the IMF forecast for 2010, India is expected to grow at 9.4%. We have already clocked up 8.9%. Not to forget that these superlative figures were preceded by a drought and global economic downturn. What for decades remained at the centre of world’s supremacy has already shifted East, especially after the global financial turmoil.

So, what has really catapulted India into the Global scene? India’s GDP is likely to quadruple from $1.1 trillion to nearly $4.5 trillion by 2020. These figures are astonishing for a country which was on the brink of bankruptcy two decades ago. The decades of socialism after Independence saw scarcity of food, grinding poverty and hostility towards open markets (ironically it was to become a panacea for India’s problems). Finally, Indian economy was rid of the stranglehold of the government in 1991. The years which followed Economic Liberalization saw the Indian economy grow manifold. What could not be achieved in nearly four decades after the Independence cascaded in the 19 years after the Economic Liberalization.

The phenomenal rise of India’s IT sector put India on the map of global economy. The IT sector grew from $150 million in 1991 to more than $5.7 billion in 2000. In 2007, the numbers for IT industry stood at $47.8 billion.

The Indian businesses are making acquisition, establishing partnership and thereby expanding across the globe. In 2007, the $72 billion TATA group acquired British steel firm Corus making the $12.2 billion acquisition the largest ever by an Indian company. Likewise, the Indian firms are making several acquisitions and mergers. India has sired business leaders, strategist and analysts like CK Prahlad, Nitin Nohria (Harvard dean), Raghuram Rajan to name a few. The Indian CEOs too are making their presence felt. This has put India in an advantageous position where it can leverage policy and opportunities.

India’s passport to prosperity is its young population. India’s human capital underlines this claim- median age of the population is just 25.9yrs. India is set to reap what experts call ‘demographic dividend’ which would facilitate sustained growth as there will be a large pool of young working population and fewer dependents. The rapid ageing which is set to occur in China and across the developed world puts India in a “sweet spot” as India will have the opportunity to benefit from the world economy through migration and the outsourcing industry. It is estimated that India has over 300 million English users, which gives it an edge over its competitor China. Armed with education, the young population of India would set out in its quest for global supremacy.

The presence of influential Indian Diaspora across the globe gives India the soft power leverage. The brand India is premised on the might of knowledge and soft power. India has become synonymous with solution and innovation. However, much of this is credited to globalization as India itself has done little to exploit its enormous potential. Whichever way it is, that day is not too far when India would be the knowledge capital of the world (world’s back office tag might change folks).

The Indian scientist and researchers are making rapid strides in the field of science and technology. It was ISRO (Indian Space Research Organization) space mission- the Chandrayaan-which discovered water on moon with the help of NASA. Looking at the progress that the Indian scientists and professionals are making across the world, it is disconcerting that India could not make the best of its talents reserve.

A huge market exists in India’s own backyard which, so far, has remained untapped: SAARC (South Asian Association for Regional Cooperation) members. Studies have pegged the potential of trade in this region at $85.1 billion. And India is the “Big Daddy” in this region. Business interaction in this region on the lines of EU would increase India’s clout across the globe. However, Indo-Pak friction remains a challenge in this region.

The rise of the middle class lies at the heart of India’s growth story. In fact, it was India’s large domestic consumer base which insulated it from global financial downturn. This large base of consumers with increasing purchasing power is attracting firms from across the world. Also, business models with proven success in India are being used in other developing nations successfully.

While discussing India’s chances of becoming a world leader China is inevitable. Although China is ahead in the race between the two competing nations, the fact is that China is an authoritarian regime while India is a democratic country. China’s growth has been state induced i.e. manufactured, while that of India is natural. While decisions taken by a tyrannical government can be quick and decisive, they can cause fatal conflicts-the nemesis of an authoritarian state. According to a study, after 2010 China’s working age population would start falling. By 2040, China would have over 400 million pensioners i.e. world’s second largest population after India. In India’s case, the aforementioned demographic dividend would peak by 2035. Experts rightly point out that China’s population, which would get richer by the day, will want their fundamental rights and freedom. This may create complications and conflicts which will hinder growth.

On the other hand, in democratic India the debates could be raucous and decision making slow. But the eventual decisions are consensual. This will ensure a sustained growth over a long period of time. To put it simply in Thomas L. Friedman’s words, “I don’t think that this century can belong to a country that censors Google”. However, India has to cover a lot of ground before it pips China.

But potential does not always translate into success. If India has to realize its dream, it will have to address efficiently some of the pressing issues. The most glaring of them is the menace of Naxal violence: an insurgency the extreme left wing is carrying against government in several parts of India. Poverty alleviation is another challenge India has to grapple with and surmount. And how can we miss corruption!

India must learn its lessons from the west. Development cannot be at the cost of environment. India’s strategy must assimilate environmental concerns so that lush green surroundings and concrete can coexist. India will have to make its own path to global supremacy.

There was a time in history when India accounted for about 25% of the global trade. Perhaps, the world’s fastest growing democracy is waiting to come full circle. The trail India leaves behind in its journey may well reflect that history belongs to them who enlighten the world with their ideas.

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