A HUGE campaign is going on across the country about India aspiring to become a developed country in 2047. There is nothing wrong in targeting something big with a hope that even if it fails, we could reach somewhere near to what had been the goal. However, the goal shouldn’t be so unrealistic that people think it infeasible in the first place. India is currently the fastest growing economy in the world and there is possibility of relatively high growth being maintained in India over the coming years compared to global average. But growth is an indicative metrics which is a result of several complex processes that influence the outcome of value addition, and it is not only good wishes and missions that determine economic growth. Particularly in a globalised world there are several factors which influence economic outcomes of a country including trade environment, investment flows, impact of technology and productivity and frontiers of technologies in different segments, migration, climate change and most importantly engagement of economic actors at various levels and policies which are influenced by political factors.

Economic textbooks simplify this complex world by building a narrative where economic relations appear to be sanitised from political, cultural and ideological factors and tend to hide the underlying power relations that operate at various levels. Aspirations materialise on the basis of how policy makers drive policies incentivising actions that are in sync with the defined goals. If we have goals to achieve a particular growth rate, then we need to identify our strengths and gaps. Markets are good in picking winners but worst in signalling resources where there might not be immediate possibilities of gains. Economic policies and development models of the Washington Consensus and also of post-Washington Consensus are largely devoted to assigning market the prime role in distribution of resources. Intervention of the State is subject to the outcomes of the market. In other words, the underlying principles of these versions of neoliberal model is that market should be given free hand but the losers in the process may at best be provided some handholding to sail across.

MATHS TO ACHIEVE VIKSIT BHARAT

According to the World Development Indicators, India’s per capita income in 2023 is 2,540 dollars which is a per capita income categorised as low-middle income bracket defined by the World Bank ranging per capita income of 1,136 dollars to 4,465 dollars. Developed countries are defined as those recording a per capita income above 13,846 dollars. China’s per capita income in 2023 is 13,390 dollars. Hence China is approaching the per capita income level of developed countries. For instance, advanced economies such as UK record per capita income much higher of 47,700 dollars and USA 80,450 dollars. Now to achieve per capita income of 13,846 dollars by 2047 requires a per capita income growth of 8 per cent per annum which is simply the compound annual growth rate required for successive 22 years from 2025 to reach the minimum threshold of developed country per capita income. The highest achieved per capita income growth in India in the past 50 years were recorded in two episodes 2003-07 and 2014-18 and the average growth of per capita income turned out to be 6.1 per cent. The annual growth rate of per capita income crossed 8 per cent only in one year in the past 50 years and that is 2021. It happened because of the low base experienced during the pandemic as the growth rate of per capita income in the preceding year 2020 was (-)7.1 per cent. Therefore achieving 8 per cent growth rate in per capita income for every year in the coming 22 years is not something appearing to be feasible. Also, these are the periods when India recorded high growth in GDP with close to 8 per cent in 2003-07 and average growth of GDP of 7.3 per cent during 2014-18. The world economy grew faster during these years also recording average growth of 4 per cent and 3 per cent respectively in the two episodes. Now just to reach the threshold of upper middle-income countries which begins at per capita income of 4,446 dollars, the average growth in per capita income of 5.8 per cent is required every year in the coming ten years which seems feasible. To reach China’s per capita income of 2023, India would require another 22 years with 8 per cent growth in per capita income every year, then only India will be able to reach China’s current per capita income in 2047.

GLOBAL GROWTH PROSPECTS

India has certain advantages and disadvantages in achieving perpetual high growth rate in per capita income in the coming years. Its biggest advantage is the ‘demographic dividend’ which of course can’t be realised automatically. Lack of gainful employment in general and high youth and educated unemployment are the real challenges to achieve high growth in per capita income. There had been a sharp rise in inequality in India which influences consumption patterns and the sources of growth. More and more growth are dependent on profit incomes, it reduces the base of economic growth with few earning huge gains through asset inflation while a vast majority remains stuck at the subsistence levels. High inequality itself becomes a hindrance for desirable growth in per capita income. More importantly we are in the verge of technological transformation and the new bout of innovation is likely to reduce the use of direct human labour in the production process. According to the Economic Survey, India requires to create additional 7.85 million jobs in the non-farm sector every year until 2030. Growth is not only about producing but also of creating buyers who would be realising the produced values, and that requires strategic intervention on the part of the government creating adequate gainful employment to take advantage of the demographic profile where dependent population will continue to be lower in proportion for at least another one and half decades.

The global growth scenario has not been encouraging in the recent past and forecasts for the future by the international agencies also do not seem to be high. In the past five years, world average growth rate was 2.4 per cent and according to the World Economic Outlook and Global Economic Prospects projected growth rates for the year 2025-26 are 3.3 per cent and 2.7 per cent respectively. These are in any case lower than the average growth of world GDP in the first two decades of the new millennium. Therefore, India has to grow in the midst of slowing down of the global economy although in the past she grew fastest when global growth was high.

It is also important to acknowledge the fact that future industrialisation and growth must happen with net zero emissions. Low carbon footprint in the production structure must be ensured by introduction of green technologies which would be creating unavoidable constraints at least in the short run as the cost of production is expected to increase. Global Economic Prospects highlight the possibilities of rising geopolitical conflicts in the future with countries increasingly being driven by protectionism and trade war. Global trade growth has declined, and the supply chains are likely to be affected by these tensions and conflicts. Most importantly as the gap between frontier technology and different production structures are declining, the growth of productivity is also showing a declining trend across sectors. Also, climate shocks have disruptive effects on production processes, and all these add to rising uncertainty in the global economy. India cannot be insulated from these global factors but at the same time, countries of the Global South particularly India, and China would be experiencing faster growth in the coming years. The real question is how we strategise to get the best out of our potentials rather than floating slogans that are impossible to achieve.