Animal Spirits: India's march to become an economic superpower will not be easy

It is August 15, 2047, and India has turned 100. A hundred years of giant strides as an economic destination. An $18-trillion economy, just a whisker away from overtaking China as the world’s second-largest. The third-largest stock market in the world with the Sensex at 1 million. The world’s largest democracy and an economic superpower.

This is no pipe dream. Nor does it assume annual growth at double digits to reach this summit. Modest compounding and avoiding major policy mistakes gets us there in the next 25 years. The headline numbers are all set to be staggering on our hundredth anniversary; it is the stuff below that makes one pause.

Despite such phenomenal growth at an aggregate level, India may still not be a developed nation by then. Pollution, climate change and overpopulation may have rendered many of our top cities uninhabitable. Economic inequality and communal disharmony may have shattered the social equilibrium, making India intrinsically unsafe. A steady outward migration to countries with better living standards may have left us deprived of the best talent. And, just like in China, whose enormous economic size never succeeded in making it a country its citizens enjoyed living in, India too may have attained size but fallen short of what it takes to become a country that is developed, in the true sense of the term. Gross domestic product (GDP) is good, but it cannot paper over all cracks. We need to proceed with caution.

The numbers first. While India’s GDP may indeed have soared to the $18-20 trillion range by then, our per capita income may still be well short of the $22,000-25,000 range, widely considered a benchmark for developed nations. This follows from the current trend of growing inequality, only set to become more pronounced in the coming decades. The unemployment rate could consistently be in double digits by then. A recent Oxfam report says that the top 1 per cent of India’s population accounts for 40 per cent of the country’s wealth with the bottom half adding up to only 3 per cent. By 2047, this top layer could well own 60 per cent of the national wealth with the bottom half accounting for only 2 per cent. The gap gets wider, thus limiting recent gains on per capita income and pushing India at best to an upper middle income country status. That can be called improvement but would have fallen well short of our true potential. This is a vital metric to keep an eye on. The more GDP growth outstrips per capita income growth, the more unstable our growth story becomes.

Economic disparity is not the only reason for social instability though. Indian minorities, notably Muslims, are feeling marginalised, harassed and left behind. In another 25 years, India may have taken even greater strides towards a majoritarian Hindu state and this could have major fallouts in terms of large-scale civil unrest. This may sound alarmist, but the wind is blowing in that direction.

The ongoing Joshimath crisis is a reminder of the huge ecological challenge that confronts India in the coming decades. Disasters in Shimla, Darjeeling, Manali will surely follow and it is not just our mountains that are at risk. By 2047, some of our main cities like Mumbai, Kolkata and Chennai may face rampant floods because of rising water levels. Severe droughts and heat waves may wreak havoc on lives and livelihoods every year.

Pollution may have rendered metros like Delhi utterly hazardous to live in, as choked infrastructure may have done to Bengaluru and Mumbai. As rural to urban migration gathers more momentum, our cities will struggle to cope and in a couple of decades the situation may have become totally unmanageable. Perhaps these signs are clear already, which may explain the steady exodus of skilled professionals from India to greener pastures. Last year, nearly 200,000 Indians migrated away, thousands of them millionaires. By 2047, we could be losing millions of skilled citizens each year to developed countries.

Finally, there is the matter of India’s place in the Human Development Index (HDI). For a country of our size and growing importance, to be stuck at a lowly 132 out of 191 countries on the HDI index is a matter of grave concern. With economic growth, our position would have improved from this abysmal ranking but it may not have lifted us to the league of the top 66 nations in this list which are considered developed. Till that happens, GDP numbers are quite meaningless. They may give us bragging rights, but not have made India a great country to live in.

India@100 will have many things to celebrate. All things said, it would still have been a remarkable journey for a relatively young nation. But the experience of China should teach us that size isn’t everything. Many smaller nations have blossomed into wonderful success stories without boasting of trillion-dollar economies. It’s the ‘internals’ which matter more, and it is on those that our policymakers would do well to keep an eye on as we move from 75 to 100.

It is only then that 1.6 billion Indians would rise together to applaud a truly great century.