This is a critical moment in India’s history.
It now has the world’s largest population – and one of the youngest.
Its fast-growing economy has vast potential. But the challenge now is to seize the moment.
In the mid-1980s, India was a top ten global economy. But it tumbled out of that list for
more than two decades as several countries powered ahead of it, particularly China.
But India has been growing fast. As of 2022, it ranked in the top five for the first time ever.
It is widely projected that it will be behind only China and the USA by 2030.
It is truly a sweet spot, so to say, right now for India.
The broad story of Indian growth, development, poverty, is one of improvements, sustained
improvements over time, and, in fact, improvements that have accelerated in the last 15 years or so.
Added to its growing economic importance, India is becoming more prominent on the world
stage as the changing global order gives it ever more geopolitical significance.
But there are huge question marks over whether or not India will take its chance.
The real problem with India is that India's human capital, whether it is in terms of education,
whether it is in terms of public health, whether it is in terms of training,
whether it is in terms of participation of women in the labor force, that is extremely poor.
There aren't enough jobs. You don't see that kind of admission,
or you don't see that attention being paid to unemployment as a problem.
It's hard for me to overstate how severe the environmental damage ongoing in India is.
Will this be the Indian century? Or could India
squander the chance to become a true global economic powerhouse?
We’ll take a closer look in this episode of Business Beyond.
One of the big reasons for optimism around India’s economic prospects is its strong
GDP growth rate relative to other large economies.
In 2022, the global economy grew by just over 3%. The USA and China grew
at roughly the same rate, while the EU 27 did slightly better.
But India outstripped them all, achieving GDP growth of
7% last year. By far the biggest figure among the world's 10 largest economies
And India has another growing advantage over those countries – a vast youth population. As
other industrialised nations deal with the challenge of an ageing population,
India has a unique demographic dividend.
India has overtaken China as the world’s most populous country.
It now has a population of 1.425 billion. That is projected to rise to 1.7 billion by 2060,
by which time it is expected to have close to half a billion more people than China.
And perhaps the biggest demographic dividend India has to play with is
the youth of its population. More than half are under 30.
I think it can be in a very strong and positive place. I think it has the prerequisites that could
put it in that place. Most of all, the very large reservoir of labor that it possesses,
a young population, a large, capable, fairly well-educated population. So,
I think that all of these things are in favor of India becoming this powerhouse.
Strong economic growth in India is not a new phenomenon. But many
experts believe the economy is better placed than before to capitalise.
The rate of growth that we see today is actually lower than the rate of growth that we saw in the
2000s. For example, after the 1991 liberalization, that's when really the rate of growth picked up,
and we had several years of growing at 8% or more.
India is growing very well. A lot of the internal issues that had been there have
been sort of cleaned up. A lot of reforms have happened, but also balance sheets of
the banks and the companies which had been in some trouble have all been cleaned up now. So,
in some sense, India now stands in a situation which is even better than what it was in 2003,
when the first wave of this very rapid growth began.
India has not been shy about talking up its growing economic prowess.
That was clear when the country’s prime minister Narendra Modi visited the US last
month for a pageantry-filled four-day state visit.
Mister Speaker, when I first visited the US as Prime Minister,
India was the tenth largest economy in the world. Today, India is the fifth largest economy.
And India will be the third largest economy soon!”
One area Modi's government has focused on is urban infrastructure such as roads, motorways and
bridges. This year, the government plans to plough a record $122 billion into capital expenditure.
That is an area of great improvement. This is infrastructure
across transport infrastructure, as well as communications infrastructure. Additionally,
amenities at the household level. So just basic things, including access to toilets, to drinking
water, to clean cooking fuel, to electrification, all of that has increased substantially…
But could India seriously rival long established economic powers like the USA and China?
It certainly lags very far behind both in one key area – exports.
China’s modern economic miracle can largely be explained by its remarkable manufacturing
and export prowess. It's the biggest exporter in the world, ahead of the USA and Germany.
You have to go a long way down the list before you get to India.
The world's most populous nation is only its 18th biggest exporter.
Many point out that comparisons with China and the USA are simply unrealistic.
We should recognize that the gap between India and
China is really massive. The Chinese economy is six times India's size.
Chinese per capita income is $12,000 per capita. India's per capita income is $2,000 per capita.
China provides what, more than eighteen, fifteen to eighteen percent of global trade.
India provides 2% of global trade. And the gap between India and China, even when China
is slowing down and India is going faster, has only increased in the last decade or so.
China clearly has been a manufacturing machine and very, very successful. I think
India is a little different than there. India is not a manufacturing machine. It
has not been terribly successful. It has had some successes in some areas,
but its past has stayed a lot longer with India than it did with China.
So, if manufacturing is not a strength, what makes the Indian economy tick?
Agriculture is the main source of work in India – more than 2 in 5
are in the sector according to the International Labour Organization.
Services accounts for a third, with around 10% employed in public services.
And while India has done well in some sectors such as textiles and pharmaceuticals,
manufacturing overall accounts for less than 12% of the Indian workforce.
Let’s take a closer look at that services sector.
Because one thing within that which is certainly making India tick, is Tech.
Indian export growth has been powered by its information technology services. It
has also developed a reputation for having a vibrant start-up culture. In terms of funding,
it’s now number two in the world behind the US.
Neha Singh is the CEO and founder of Tracxn,
an Indian firm which tracks the progress of companies across the sector.
“The IT sector is fairly well poised,
which includes large IT companies which are doing a lot of digitalization
projects. So people have also realized the importance of digitalization globally.
The second is the whole start-up sector. There are various subsectors within that,
but that is another thing that continues to grow and there you see a lot newer areas coming up.
She says India is thriving in the development of digital infrastructure,
helping to connect the country’s vast population to various services.
So, the government has done a lot of things in having this sort of the digital infrastructure,
which has boosted some of the other things, like boosted money transfer, boosted
digitalization of cash transfer, which happens. The percentage of transactions,
digital transactions has increased in the economy. It has made that accessible to a lot of people.”
India has also become an important destination for some major tech
giants. Apple has moved some of its iPhone production to the country,
while Google and Amazon recently vowed to heavily step up their activities there.
Where foreign investment really particularly direct foreign investment, but even equity is
very powerful, is that it knows where the high returns are better than the local capital does.
Like if Apple comes in, for example, it brings in with it not only the Apple technology,
Apple's management style, it also brings in the way of doing things.
So far, we’ve focused on the positives. But there’s another side to this story. India
has come a long way in recent years, but a vast array of challenges still need to be confronted.
Many of the experts we spoke to say India has
a huge problem when it comes to so-called "human capital".
That's focusing on issues such as education,
health and gender equality in determining overall economic success.
In his book “India is Broken”, Professor Ashoka Mody from Princeton University
says that in the 75 years since independence, successive governments have failed the people.
So the Indian economy fell particularly sharply during COVID. It's bounced back. And people are
extrapolating that bounce back as some kind of a new normal, which it is not. Because if you
look at the last four years, if you average the growth out over the last four years,
including a year before COVID India has been growing at about three and a half percent,
which is nowhere close to the forecast being made.
He says India’s problems won’t be solved by looking at GDP figures.“It's in the shadows
that the problem is. Poor job creation for 75 years, with no prospect of job creation in the
coming 2030 years, a youth youthful population emerging into this job scarce environment,
poor public goods provision, education, health, cities, the environment,
and the judicial system. The judicial system is broken. The environmental damage is rampant.
Let’s focus now on one of the areas he mentions: employment.
India’s huge youth population needs jobs but there’s a big problem. The better
educated you are in India, the more likely it is you will be unemployed.
Overall Indian unemployment stands at around 7% but for those who have been
to third level education and beyond, the unemployment rate is more than double that.
Even those with an intermediate or second level education rate struggle
to find work more than those with basic or practically no education.
Given that more than 40% of Indian employment is in agriculture, many of those with low education
levels work in extremely poorly paid jobs. That is obviously a big problem, allied to
the fact that there is not enough adequate work for those with high education levels.
The economy has not been able to produce enough jobs to absorb all of these people. I think
what sometimes happens is that there is a very narrow top of the Indian pyramid and all of the
conversation in the Indian media and perhaps even globally circles around this very tiny sliver. So,
there is sometimes a feeling that there are far more high skilled jobs than there actually are,
while what's happening on the ground is that there just simply aren't enough
high skilled jobs to be able to provide to these young Indians.
Another issue India must grapple with is the role of women in its labour force.
Let's take a selection of countries - major economies like China, the US and the UK,
as well as some big developing economies comparable to India such as Vietnam and Indonesia.
The gap between the amount of women and men in work in all those countries is
vastly smaller than the gap in India. Just over 20% of women in
India are officially in the labour force, compared to over 70% of men.
“Any story of Indian growth and of employment powered Indian growth cannot really function to
its full potential if half of the population is not participating in ways that would be expected
at these levels of growth and development or that are happening elsewhere in the world. So, yes,
Indian female labor force participation is among the lowest in the world.
And the problem, it seems, is getting worse. Not only is the level low, what we have observed
is, in the past few decades, that level has actually decreased over time.
So, if we simply go by the fact that India is developing, women are getting more educated,
they have fewer children, we would expect the trend to be in the opposite direction. So, we
would expect that women should be more likely to participate in the labor market rather than less.”
India’s unusually low female labour force participation rate
is often attributed to specific societal factors.
The gender roles require women to be the primary caregivers within a household. They are supposed
to be the primary person responsible for taking care of household chores. And basically,
this is what we call the reproductive labor that women provide. So, if women are the ones who have
to do this, then obviously they will have less time to participate in the labor market, right?
Ashwini Deshpande has studied India's inequalities for decades. She says that
focusing on societal norms does not give the country's government an excuse for inaction.
She says simple moves like providing access to cooking gas
cylinders would give women more time to participate in the labour force.
I think here the academic community also needs to introspect to say
are we focusing enough on the economic factors that will change women's participation in
paid work or are we exclusively just going inside the household and focusing on some
very difficult to change social norms? Then we are stuck for 200 years. Nothing will change.
Inequality is NOT unique to India. It afflicts the world’s richest economies too.
But many experts say India’s strong economic indicators mask the depth of its social problems.
We are really talking about a very poor country. When you spread it across this thing, the GDP,
with a massive country like us, the GDP will always be distorted. It will always be bigger,
it will always be huge because of sheer population and the sheer geographical
size. The fact is also that India, because there are certain sections of Indian science
and technology which did very well, so India can send rockets into space, india can do all
these things which a lot of equivalent countries cannot do. India can have an aircraft carrier.
India has these ITs, these information technology companies, et cetera, makes it very attractive.
And India is not really at the lowest rung in that sense, but it's not really at that level at
which many Western commentators think that India is or India is about to about to break through.
Ashoka Mody points to the country’s education system as
a fundamental example of why he believes the country is, in his words, broken.
The psychology has set in, oh yeah, education is important
and eventually we will get to it. But really, is it really that critical?
Data journalist Rukmini says there have been improvements in Indian education - particularly
around female participation - but that there remains huge inequality.
So it means that a person like me was able to access uniformly excellent quality of education,
which then just continues to give you steps up in life. But what we do know is that from
assessments of quality of education across Indian schools, particularly in rural areas,
children go right up to class three four, five, grade three four five without being able to read a
single line in any language, not just in English, without being able to do simple calculations,
including addition and subtraction. So they are making it to school. Teachers are there.
In those schools, school structures exist, but the quality of education that they receive in
there is extremely patchy and extremely driven and sort of mediated by privilege.
It’s not only economic factors that have to work in India’s favour for it to secure its future.
One huge concern is the environment. Indian cities are among the most polluted in the
world – a problem which Ashoka Mody says the government is not dealing with - and
the scale of environmental damage in India is a serious threat to social and economic progress.
Indian cities traditionally occupy the highest ranks in the world's most polluted cities, indian
cities compete with each other. Which one of them is going to be more polluted than the other?
But the really severe problem is with water. Air can in some sense be clean. But the dying rivers,
every single river I'm going to assert in India today is dying for various reasons.
Over exploitation, dumping of waste, sand, mining of riverbeds. There is zero interest in that.
Another vital issue, which many say Narendra Modi’s ruling Hindu Nationalist party have
made worse, is the question of democratic decline and the worsening ethnic tensions between Hindus
and the country’s sizeable Muslim minority. Many believe this threatens the Indian republic itself.
The fact of the matter is that there's been a democratic decline in India. India's democracy
is not doing that well. There's been targeting of religious minorities like Christians and Muslims
in India under Mr. Modi's Hindu regime. It's a very Hinduist nationalist regime. And that
makes countries like United States and Western European countries extremely uncomfortable.
If we neglect these problems for too long, I think social tensions will rise as they have
already started to rise. And there is a limit to the divide and rule kind of policy. You can
pick one section of the population against the other and you can say immigrants are responsible
for your problems, or this race is responsible for the problem of the other race, et cetera, et
cetera. There's a limit to which that blame game can take you just that far and no further.
To say India finds itself at a decisive moment is an understatement. As we have seen,
it undoubtedly has the potential to become a serious economic force,
rivalled only by the likes of the USA and China.
But can it overcome its problems to achieve this? There’s a wide range of views.
On the current path? The future is very bleak. The future is very bleak in my view. We are
headed to certainly an environmental crisis. We are headed potentially to social violence.
I have faith in the Indian people. And I think time and again, India has shown that, yes,
there have been dark episodes in our history, as in the history of all countries, but I think time
and again, we've shown that we are more democratic than sometimes you sort of despair. So I think I
have hope that the democratic, federal, plural, diverse character of India will sustain itself.
But I do think that economic growth is not going to solve these problems.
Some of the most sort of violent conflagrations that we've seen in India have been in very
economically successful regions of the country. So I don't think one means that the other is
taken care of. That is an entirely different and essential conversation that needs to happen
in India about just seeing fellow Indians as fundamentally equal and fundamentally good.
Will India be, in 20 years time, be a power like China? I don't think India will be
that kind of power. India is a different kind of power. I mean, if it is a power,
it is going to be very different. The democratic tradition is incredibly
strong in India, and therefore its behavior internationally is going to be very different.
It’s too soon to say for sure if this will be “the Indian century”.
Its 1.4 billion people face challenges that any society should be deeply concerned by.
But for the first time in its history, India has a shot at being one of the most
powerful and influential economies on the planet. The world is watching its progress.
That’s all from this episode of Business Beyond. If you’re interested, check out some of our recent
episodes in our playlist - and do look out for our new series Transforming Business, which looks at
the business side of the green transition. Thanks for watching and until the next time, take care!