The global economy is going through an upheaval and there are great uncertainties ahead. The global economic recession and crisis has, quite expectedly, impacted India, too. But it is a moot point whether the Indian economy is affected more by the global economic ups and downs or by India’s structural and political problems and economic management or mismanagement.
Whatever be the case, there is very significant global interest in the Indian economy. Along with China, Brazil, Indonesia, and a few other countries, India promises great potential of growth in the next few years and decades. The future of the Indian economy is thus a significant concern among the global financial and business community, economic policy-makers and managers, multilateral financial institutions, economists and other academics as well as investors and consumers in India.
If one looks at the numbers, the significant global interest in India is not surprising. It is well known that - on a purchasing power parity basis – India is already, at over USD four trillion of GDP, the fourth largest economy in the world; very close to the size of the Japanese economy, the third largest. In the next 15 to 18 years this size is expected to grow, as per various studies and estimates, four to five times. As a result many foreign investors and a majority of global companies and businesses are making a beeline for the Indian market, which promises a booming middle class of a few hundred million consumers, expanding steadily in the next few decades.
Where will the Indian economy go from here? In the three to four decades after independence, the Indian economy was characterized by the ‘Hindu rate of growth’, growing at about 3.5 per cent per annum. In the next two decades it grew at seven to eight per cent per annum, but the growth rate is under strain in recent years of global economic turbulence.
What lies beneath these numbers? What insights do we have about the Indian economy to help us analyze and perhaps ‘decode’ what trajectories it may follow in the coming years? Moreover, besides the overall numbers, what about rising inequality and financial inclusion? What about hundreds of millions of Indians living in abject poverty, without bank accounts and any access to credit? Hardly ten per cent of the country’s households participate in the capital market. What about chronic malnutrition among children? What about the lopsided 0-6 age-group child sex ratio that has declined further from 927 in 2001 to 914 in 2011? What about poor marketable skills among a big portion the huge and growing young population? What about the condition of India’s universities and polytechnics? And also, what about the political culture and institutions of governance, shaken by scams, scandals and corruption day in and day out?