On the eve of the budget session of Parliament, the talk about India’s economy is all bullish. At a time when fears of a global recession are mounting, India seems likely to prove an exception to the worldwide tale of woe. Our country is expected to log the best performance in 2023 of any major economy. Estimates vary, but if one examines the World Bank’s numbers, India is estimated to grow at 6.6 per cent, compared with just 0.5 per cent for the US and 4.3 per cent for China (though from a much higher base).
The good news may continue. The prestigious global think-tank, the Centre for Economics and Business Research, issues an annual “world economic league” table.
In its most recent report, the Centre writes: “India is now clearly on its way to becoming the world’s third economic superpower. Revised figures now show that India overtook the UK to become the world’s fifth largest economy in 2021. It has consolidated this position and is forecast to overtake Germany to become the world’s fourth largest economy in 2026 and to overtake Japan to become the world’s third largest economy in 2032. By 2035, India is forecast to become the world’s third $10 trillion dollar economy.”
This is no small matter. India’s economy is nearly $3.5 trillion—short of the $5 trillion that Narendra Modi had confidently predicted a couple of years ago, but a vast improvement on the lowly status we occupied in the first four decades after independence, when India served as a poster-child for third world poverty and destitution. Ever since the historic liberalisation of 1991, when Dr Manmohan Singh had declared in Parliament that “no power on earth can stop an idea whose time has come”, the Indian economic story has been on an upswing.
There have been setbacks and slumps—demonetisation (the single worst disaster to hit India’s economy since the Great Bengal Famine); “Make in India” never really caught on; and the expected outflow from China did not benefit us, with companies preferring to move instead to Vietnam and Malaysia. But, the story is changing for the better, as foreign governments and investors see that the arguments for investing in India are reinforced by geopolitical considerations.
Two new terms of art have come into vogue in the west. The first, “nearshoring”, refers to the need to shorten supply chains to reduce risks, by moving production lines from countries that are vulnerable to disruption. The second is “friendshoring”, the case for boosting economic cooperation with countries that have similar values to the west. In both cases, India’s stability and openness to the west as the world’s biggest democracy makes us a clear alternative to China. But there is work to do yet to make India a totally attractive investment destination—facilitating clearances, speeding up access to land, shaking up our clogged factory-to-port logistics, reducing input costs and providing tax incentives. The reform of the bureaucracy is another urgent task. For all the Modi government’s repeated talk about the ease of doing business, it takes an average of 112 days in India to obtain all the required clearances to start a business. In the US, it takes three days.
If there is one fly in the proverbial ointment, it is the risk posed by our dysfunctional politics to the social harmony that is so indispensable to economic progress. The readiness of our ruling party to stoke communal divisions in the country, fanning flames it first ignited by injecting the toxin of hatred of minorities into political discourse, is dismaying—all the more so since the same party rejoices in any economic good news and seeks credit for it. The government must realise it can either focus single-mindedly on creating the conditions for economic growth or try to reap violence by inciting hatred, but it cannot do both, because the latter undermines the former.
A country riven by resentment, rioting and violence is not likely to attract investors, because investors flee such places. For the India story to continue to glow, the BJP must abandon the politics of minority-bashing and preach the virtues of co-existence. It is time to put economic pride ahead of hindutva prejudice.