September 2021

WHY INDIA SHOULDN’T JUST AIM TO BE A $5 T ECONOMY

Raman Jokhakar
Editor

Indians succeed MUCH more in every country compared to India! They are, in fact, a model minority – highly educated, do not seek state support, have the lowest police arrests, blend well culturally and rise to the highest positions in business and profession.

Indians in the US have a per capita income of $55,000 (and average household income of $120,000 surpassing all ethnic groups, including white Americans1). If the same group were in India, the GNP of India will be more than $70 trillion!

India was about 25% of the world’s economy till 18202 when the British arrived. And 130 years later, when they left in 1947, India’s share was 3% (wiping off 2,000 years of growth in one century)! Yet, India was the largest economy in Asia in 1947.

On the other hand, today India’s share of global population is 18% and its share of global economy 7%3, or still 3% in absolute value out of about $100 trillion global GDP. India’s share in global exports was 1.71% in 2019. All of this doesn’t add up and we need to think: What should be India’s share of global economy and exports?

We have to ask: why do Indians not succeed in their own country? How come India is 20% of China when they were both the same in 1980 ($180 bn GDP)? China has more than five times the global trade as India ($800 bn vs. $4.5 tr). India was known for its fabrics for centuries; today Bangladesh has overtaken us in the garment sector and per capita GDP (remember, India had freed Bangladesh just 50 years back). India is the cultural source of nine-tenths of South-East Asian countries, but ASEAN countries have a larger GDP than that of India. Why have countries with bigger disadvantages overtaken India? What is the reason for such a large and long gap between potential and performance when Indians are perhaps as intelligent as anyone else?4

 

1   Economic Times, 29th January, 2021

2   Read Angus Maddison

3   PPP adjusted

4   Attributed to Kishore Mehbubani’s talk


I think today India is at its historic best opportunity: absence of Nehruvian economics (from 1950 to 1980 we grew at 3.5% per year; global growth was 4.5%; our population grew at 2.5%; hatred for business reached its peak; per capita income grew at 1%; and by 1980 India was the poorest in Asia). Today, youth is power (34% population between 15 and 24 years of age) and hundred other reasons. Therefore, the next ten years are crucial for the speedy growth of India.

Recent data suggests encouraging trends: UPI (3.2 billion transactions, Rs. 5 tr in transactions in March, 2021 compared to Rs. 2 tr in March, 2019); FastTag (192 m transactions since inception, saving fuel and revenue leakage); 55,000 Startups and expected to reach 100,000 by 2025; 58 Unicorns (employ 1.2 m people); Population (fertility is 2% whereas replacement rate is 2.3%); GST (last nine out of ten months generated more than Rs. 1 lakh crores each month); Software exports ($160 bn); Outsourcing (60% of global outsourcing comes to India); the IT Industry is $210 bn. Just imagine, if a food delivery company can add Rs. 100,000 crores to the market cap what can the index do if 20 such IPOs hit the markets! And this at a time when only about 3.4% people invest in stocks (against 50% in the US and 7% in China).

This is perhaps our best window in time before our population starts ageing in about ten years. Why should we not let the Indian tiger out of the cage – not into the zoo or a circus, but into the wide, wild world of competition. India doesn’t deserve to be JUST a $5 tr economy but much more!

 
Raman Jokhakar
Editor


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