Independence Day provides an excuse for all sorts of well-meaning speculations. We are meant to look forward, after all. So here?s a story that looks forward one whole generation, 30 years to be precise. The story is culled from an interesting economic report,India 2039: An Affluent Society in One Generation, commissioned by the Asian Development Bank. The report is not a prediction of what is likely to unravel?few would hazard a guess at that distance?but rather a statement of what is possible if things are done right.
The ?possibility frontier??and hence a benchmark of sorts for the reality that comes forth?is audacious by any standards. The report believes India can reach the ?affluent? status in a single generation, i.e. by 2039, from having graduated just last year to the ranks of IMF?s lower middle income nations. Put simply, an uninterrupted annual growth rate of just 9.5% for the next three decades will do the job. Compounding can highlight the impact. It means raising India?s economy to roughly 19 times its current size and overtaking the US economy?currently 14 times larger than India. It means lifting per capita income more than 22 times from below $1,000 to close to the world average?that is currently about nine times as high as India?s. All this is within reach and, with a few assumptions about the rest of the world, ?economic superpower? status is alluringly close.
To put things in perspective, in the last 30 years, we have raised our per capita GDP by 230%. No mean achievement, but dwarfed by China?s explosive ten-fold growth.
The dream future, or the nearly double digit growth rate sustained for over a quarter century, is certainly possible. A few Asian countries have done it in the past and have truly catapulted themselves from poverty to affluence, and China seems to be going through this. Unfortunately, it is not a preordained destiny for India. Perhaps equally likely is the other possibility?that of a ?middle income trap? where many countries have stagnated after brief periods of impressive growth.
So, what is it that India needs to do to avoid losing sight of the golden path? The report points out three very important challenges: maintaining, nay, strengthening social cohesion by managing if not eliminating disparities and rural poverty; becoming a truly globally competitive economy that promotes innovation; and being a responsible global citizen as its importance rises almost nine-fold in the global economy. At the same time, the world needs to be benevolent to India?it should remain more or less peaceful and open for the entire period.
The report goes further and prescribes a sevenfold path to this nirvana of triple transformation. This is indeed quite simple and straightforward: ?Tackle disparities and achieve inclusive growth; improve the quality of the environment; eliminate infrastructure bottlenecks; create a competitive edge; improve delivery of public services; create functioning cities ; renew the focus on education, technological development and innovation?keys to sustaining improvements in competitiveness; launch a revolution in energy; ensure security and competitiveness; and foster a prosperous South Asia and become a responsible global citizen.?
To its credit, the report takes a broad sociopolitical view of development?India is surrounded by five of the world?s seven declared ?failed states?, with all the associated challenges. The individual chapters have some insights explaining the recent past. But it is not clear that the big picture is entirely consistent or the conclusions inevitable from the analysis. The introduction makes a philosophical bent obvious: ?The economic successes are due primarily to India?s dynamic and competitive private sector ?despite significant failures of government on many fronts.? Most of the single-generation transformations held as examples, curiously, happened in dictatorial regimes. No Indian would claim our governance or politicians lack room for improvement, but as Churchill said, we don?t know anything that works better. Over-lecturing by technocrats, who don?t have to face elections, may not help too much.
At the end of the day, it is hard to disagree with the report or the path shown. The trouble, as always, is in execution. Also there is no way of telling that these seven steps constitute an exhaustive list or, since these are all continuous and often subjective measures, what counts as fulfillment. Only last year the hallowed ?growth commission?, headed by Nobel Laureate Michael Spence, came up basically saying, as I had mentioned in a past column, that they really don?t have a clue to growth.
A generation is a long time for change?just imagine the worldview in 1979! Que sera sera?but regardless of how it pans out, this report can always say, ?I told you so.?
The author teaches finance at the Indian School of Business, Hyderabad