Is this the time for India to truly shine?

It will take you an average of 3 minutes to read this article. By the time you get to the end, India would have increased it’s population by 150 people. By tomorrow, there will be a net increase of 57.000 people living in India. Judging by these numbers alone, it’s not difficult to envision why India can become the world’s biggest economy.

The Indian economy is currently the world’s sixth-largest by nominal GDP and the third-largest by purchasing power parity (PPP). India has a mixed economy, with both private and public sectors playing a significant role in its development. The International Monetary Fund (IMF) expects India to grow by 5.9% in FY 2023–24 and by an average rate of 6.1% over the next five years.

India has recently released its GDP estimates for the October-December quarter of the fiscal year 2022-23, along with revisions of the past three years’ data. The GDP data suggests that India emerged stronger from the pandemic than initially assumed, with growth gathering steady momentum since the fiscal year 2022-23. Despite the global slowdown, India’s exports have performed well, mainly because of the depreciated currency against the dollar. Although goods exports remained modest, India’s services exports skyrocketed by 30% between April and February. This was attributed to a strong digitization drive worldwide, cost-cutting measures by businesses to deal with the impending slowdown, and the growing trend of remote working, which increased demand for exports of services in technology, where India has a comparative advantage.

The share of business and professional services in total services exports also increased as companies globally now prefer outsourcing a wide range of professions, such as accounting, audit, R&D, quality assurance, and after-sales service.

How is India growing

India’s economy is projected to be the fastest-growing among the world’s large economies this year, with a growth rate of 5.9%. With India becoming the most populous country on the planet, Prime Minister Narendra Modi declared that “India’s time has arrived.”

However, this is not the first time that India has been hailed as a fast-growing economy. In 2006, the World Economic Forum in Davos was filled with billboards proclaiming India to be the “world’s fastest-growing free market democracy.” While India did not surpass China’s economy as predicted, it has continued to make progress and has been the second-fastest-growing large economy for about 20 years.

India’s recent acceleration in growth can be attributed to a series of revolutions. The first revolution is Aadhaar, a government initiative that provides every Indian with a unique 12-digit ID number that can be verified by fingerprints or an iris scan. Today, 99.9% of adult Indians have a digital ID that can be used to verify their identity instantly. Aadhaar has made it easy for Indians to set up bank accounts in minutes and transfer government payments directly to recipients with little corruption or skimming.

Unlike in the West, where digital platforms such as Google and Facebook are private monopolies that can share users’ data to make a profit, Aadhaar is publicly owned and operated. Entrepreneurs can even build businesses on the platform without having to pay the persistent fees commonly found in the West. Aadhaar’s success has spurred other revolutions in India, such as the Digital India initiative, which aims to provide broadband access to all Indians by 2023.

India’s rapid digitization has also led to a surge in services exports, which have skyrocketed by 30% between April and February. India has a comparative advantage in technology services, and the growing trend of remote working has increased demand for these services. The share of business and professional services in total services exports has also increased, as companies globally now prefer outsourcing a wide range of professions, such as accounting, audit, R&D, quality assurance, and after-sales service.

But can India really make it to number one?

Investments will be critical to meeting India’s rising demand and ensuring noninflationary growth in the long run. However, headwinds such as global uncertainties, geopolitical shifts, and rapidly tightening monetary policies across industrial economies have kept investors at bay. Production costs have also escalated due to supply chain issues and rising energy prices, resulting in bearish investor sentiment. Nevertheless, corporate profits are up due to rising prices, and banks have healthy balance sheets. India may be at the cusp of private investment revival, with cues such as the widening saving-investment gap and the highest capacity utilization of manufacturing firms since pre-pandemic times.

Mukesh Ambani, India’s prominent business leader, took a massive $46 billion gamble with his telecom service Jio, offering cheap phones and data packages to get most Indians on the internet. And it worked. More than 700 million Indians now use the internet, with smartphones as their primary computing device. India’s per capita mobile data consumption was ranked 122nd in 2015, but last year, it exceeded China and the United States combined, becoming the world leader.

India is experiencing three revolutions that can genuinely transform the country. The first is the financial inclusion revolution. The second is the internet revolution, led by Jio. The third is the infrastructure revolution. Government spending on roads, airports, train stations, and other projects has exploded since 2014, and national highway construction, seaport capacity, and airports have roughly doubled. Mumbai is also building extensive bridges, roads, tunnels, and metro lines that could connect all parts of India’s leading economic center.

However, these revolutions can genuinely transform India by helping the hundreds of millions of Indians still on the margins. Over 600 million people live on less than $3.65 a day, representing India’s greatest challenge. To create jobs, Nandan Nilekani, the architect of Aadhaar, proposed a novel, bottom-up approach. By using Aadhaar to get loans to millions of small businesses scattered throughout the country, 10 million small businesses can hire two more people each, creating 20 million new jobs.

Inclusivity is an even larger challenge for India, especially for women, who face various pressures not to work outside the home. Female labor force participation is low and has fallen from around 30% to 23% over the past two decades. Not even Saudi Arabia’s level is lower among the Group of 20 countries. Bloomberg Economics estimates that closing the gap between men’s and women’s participation could increase India’s GDP by more than 30% over the next three decades. Focusing on inclusivity would also ease religious tensions and bring India’s Muslims into the fold, who face persistent persecution.

However, India still faces several challenges that could hinder its economic growth and development. The country’s infrastructure is inadequate and needs significant improvement, particularly in areas such as roads, railways, and airports. This has led to increased transportation costs and delays in the delivery of goods and services. India also faces challenges in its education system, with a large portion of the population lacking access to quality education. This has led to a skills gap in the workforce, which has hindered the country’s ability to attract foreign investment in certain sectors.

Despite these challenges, India has made significant progress in recent years and is poised to become a major economic power in the coming years. The country’s large and growing population, as well as its strategic location, make it an attractive destination for foreign investment. The Indian government’s focus on promoting domestic manufacturing, improving infrastructure, and simplifying the tax system is expected to lead to increased economic growth and development in the coming years. The country’s skilled workforce and growing middle class are also expected to play a significant role in driving the economy forward.

India’s economy is a complex mix of traditional industries and modern service sectors. The country has made significant progress in recent years and is expected to continue its upward trajectory in the coming years. India has the potential to be admired not just for the quantity of its growth but also for the quality of its values, including pluralism and tolerance. Being an open, pluralistic democracy with a Hindu majority, it is in India’s character to focus on inclusivity, which could truly transform the country, making it, truly, like Modi wants it..an “incredible India”!

By Ioana Constantin