Re­al­is­ing the In­dian dream

Financial Mirror (Cyprus) - - FRONT PAGE -

It is not of­ten that I get to wear two hats at once. But that is ex­actly what hap­pened ear­lier this month, when I spent a few days in New Delhi.

I was in In­dia pri­mar­ily as part of my cur­rent role as Chair­man of a re­view for the Bri­tish prime min­is­ter on an­timi­cro­bial re­sis­tance (AMR). But my visit co­in­cided with the pre­sen­ta­tion of In­dia’s 2015-2016 bud­get, the first un­der Prime Min­is­ter Naren­dra Modi. Given some of my other in­ter­ests and ex­pe­ri­ences, I found what was pre­sented to be very in­ter­est­ing.

Fol­low­ing re­cent re­vi­sions to its GDP fig­ures, In­dia’s econ­omy has re­cently grown – in real terms – slightly faster than China’s. A key fea­ture of my re­search into the BRIC economies (Brazil, Rus­sia, In­dia, and China) more than ten years ago was that at some point dur­ing this decade, In­dia would start to grow faster than China and con­tinue to do so for dozens of years.

The rea­son­ing is straight­for­ward. In­dia’s de­mo­graph­ics are con­sid­er­ably bet­ter than China’s, and the size and growth rate of a coun­try’s work­force is one of the two key fac­tors that drive long-term eco­nomic per­for­mance – the other be­ing pro­duc­tiv­ity. Be­tween now and 2030, the growth rate of In­dia’s work­force will add as much to the ex­ist­ing stock of labour as con­ti­nen­tal Europe’s four largest economies put to­gether. In­dia is less ur­banised than China, and it is in the early stages of ben­e­fit­ing from nor­mally ac­com­pany that process.

But there is a catch. When it comes to pro­duc­tiv­ity, In­dia has been a lag­gard. Un­less it finds a way to im­prove, the coun­try’s de­mo­graphic pro­file could be­come a bur­den rather than a ben­e­fit.

In this re­gard, Modi’s first full bud­get did not in­clude any­thing dra­matic. But if a num­ber of ini­tia­tives are suc­cess­fully im­ple­mented, the econ­omy should re­ceive a real boost. In­deed, the bud­get’s main fea­ture is its com­mit­ment to in­vest­ments in public-sec­tor in­fra­struc­ture, even at the ex­pense of rais­ing next year’s deficit from 3.6% to 3.9% of GDP.

I have ar­gued for sev­eral years that In­dia should em­pha­sise in­vest­ment spend­ing, so I wel­come this shift. The bud­get also in­cludes a num­ber of other help­ful mea­sures, such as the re­duc­tion of the cor­po­rate-tax rate and ef­forts to im­prove the busi­ness en­vi­ron­ment.

My vis­its as chair­man of the AMR re­view also al­lowed me to wit­ness some en­cour­ag­ing signs. In my book ‘The Growth Map’, I de­scribe my un­for­get­table first visit to Gur­gaon, a mu­nic­i­pal­ity near Delhi that serves as a re­gional fi­nan­cial and industrial hub. Gur­gaon is home to a lot of high-fly­ing tech­nol­ogy firms, and on this trip I vis­ited one of In­dia’s lead­ing di­ag­nos­tics com­pa­nies, SRL Di­ag­nos­tic, which is de­vel­op­ing tools that could im­prove the use of an­tibi­otics.

The last time I made the trip from the Oberoi ho­tel in New Delhi to Gur­gaon, it took well over 2.5 hours to travel the 30 kilo­me­ters. Though a new free­way was un­der con­struc­tion, the build­ing site was full of cars and an­i­mals. As a re­sult, traf­fic was in a state of chaos, and it was im­pos­si­ble for any road­work to be done.

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I had al­ways promised my­self that the next time I took the trip, I would some­how re­peat the ex­act jour­ney. I am pleased to say that the drive now takes less than an hour and the ex­pe­ri­ence was much less dra­matic. More­over, the ho­tel car that made the jour­ney pro­vided free Wi-Fi – the first time I have come across this any­where in the world.

It is prob­a­bly too early to say with cer­tainty that In­dia will soon take its place as the world’s third largest econ­omy, be­hind China and the United States. But, given that In­dia’s in­vest­ment cli­mate seems to be im­prov­ing, that mo­ment might not be too far away. By 2017, In­dia could sur­pass Italy and Brazil to be­come the world’s sev­enth largest econ­omy; by 2020, there is a rea­son­able chance that it will over­take France and the United King­dom to be­come the fifth largest.

Over­tak­ing Ger­many and Ja­pan, how­ever, will re­quire bolder steps, es­pe­cially re­gard­ing ed­u­ca­tion, health, and eco­nomic pol­icy. In­dia will need to im­prove its ed­u­ca­tion sys­tem dramatically, both at the sec­ondary and ter­tiary level, and make sim­i­larly large ad­vances in ba­sic san­i­ta­tion (not to men­tion im­ple­ment­ing my re­view’s rec­om­men­da­tions for com­bat­ing AMR).

Th­ese de­vel­op­ments, along with a more sta­ble frame­work for mon­e­tary and fis­cal pol­icy, could lead to the type of dou­ble-digit growth that China has en­joyed for the past three decades. It is up to In­dia’s pol­i­cy­mak­ers to re­alise this am­bi­tion.

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