Business Standard

Sustaining rapid growth is challengin­g

India's goal of Viksit 2047 requires both luck and clearly outlined plans and policies

- SHANKAR ACHARYA The writer is honorary professor at ICRIER, former chief economic adviser to the Government of India, and author of An Economist at Home and Abroad , Harper Collins, 2021

In recent months, we have heard a great deal about India becoming a developed country by 2047 (Viksit 2047). It is certainly a very worthwhile objective, which connotes not just economic developmen­t but many other dimensions of overall societal developmen­t. Even within the narrow dimension of economic developmen­t, there is much debate and ambiguity about what constitute­s a developed economy. As a first approximat­ion, some have taken this to mean a “high income country”, as defined by contempora­ry World Bank categorisa­tion of nations according to per capita income. From this perspectiv­e, it would mean nations with a minimum per capita income of about US$14,000 in today’s prices and exchange rates.

It is important to understand and appreciate that for the vast majority of today’s developing nations (by definition, low- and middle-income countries), the journey to the foothills of high-income nations is likely to be long and hard unless they are blessed with bountiful natural resources like oil or critical minerals. History tells us that. In the 74 years since 1950, leaving aside some oil-rich nations (mostly in West Asia), only a small number of countries have made the transition. They include a few well-off nations in Latin America (like Chile and Argentina) and in southern Europe (like Greece and Portugal) that were already close to being high income in 1950 and, of course, the developmen­t exemplars from East Asia, including South Korea, Taiwan, Singapore, and (on the threshold) Malaysia, and mighty China. It is this last category that has really demonstrat­ed the capacity and tenacity for sustained, rapid economic developmen­t over two or three decades, which all other developing nations need to emulate.

The daunting challenges faced by poor countries in sustaining rapid economic developmen­t were brought home to me early in my career as a profession­al economist at the World Bank during the 1970s. My first economic “mission” was to Sudan in 1971. During my six weeks there, the paucity of capital, skills, technology, entreprene­urship and even peace and civil order became quickly apparent. The Blue and White Niles flowing through the country and meeting in the capital, Khartoum, encouraged an optimism about Sudan being a “nation with long-term growth potential”. Well, more than 50 years later, it seems that potential remains largely unrealised, with decades of long and bloody civil wars and the secession of South Sudan taking their heavy toll. For 2023, Sudan’s per capita income was estimated at a little over $500, making it one of the poorest of low-income countries. A few days ago, the UN warned that five million people “could slip into catastroph­ic food insecurity… in the coming few months.”

The following year, I was a part of a Bank mission to the Federal Republic of Yugoslavia. As we toured the prosperous provincial capitals of Belgrade, Zagreb, Ljubljana and Sarajevo, among others, we were struck by the developed-country quality of urban infrastruc­ture and the fairly prosperous standard of living. Up until the late 1970s, the country was one of the fastest growing in Europe, despite the change of economic regime from socialist planning to “market socialism”, all under the watchful eye of the wartime national hero, Marshal Josip Broz Tito. After his death in 1980, the country fragmented as the constituen­t republics were caught up in bitter rivalries, which paved the way to bloody ethnic conflict and the wars of the 1990s. Provincial republics became nations: Serbia, Croatia, Slovenia, Montenegro, Bosnia, Macedonia and Kosovo. Today, all are in the high-income category, but there is no Yugoslavia. In the mid-1970s, I worked for a couple of years in Tanzania, a poor east African nation which was experiment­ing with a version of socialism and rural semi-collectivi­sm (“ujamaa”). Fifty years later, after many ups and downs, its per capita income in 2023 was estimated at about $1,300, towards the low end of the lower-middle income category.

In comparison, India’s developmen­t journey since 1950 has been much better but not stellar. For three decades up to 1980, as the country experiment­ed with socialism, planning and inward-looking developmen­t, economic growth was modest, averaging less than 4 per cent. After the major reforms of the early 1990s, growth accelerate­d markedly to average 6 per cent in the last 30 years, including a spurt of nearly 8 per cent between 200203 and 2010-11. But, as Chief Economic Adviser V Anantha Nageswaran has recently emphasised, such growth was not sustained. Yet, this is what we need to do to attain the foothills of developed country status in the economic dimension by 2047.

Several studies, including one by the Reserve Bank last summer, has shown that the Indian economy has to grow by 8 per cent between 2022 and 2047 to cross the $14,000 cut-off level (in today’s prices) to join the band of high-income nations. If 8 per cent growth can be maintained over the next 10 years, our per capita income will equal Indonesia’s today, Brazil’s (today) after a second 10 years, and exceed $14,000 by 2047. But this is simply arithmetic. The actual trajectory of our economy will depend greatly on the global economic and geopolitic­al context, the nature of technologi­cal progress, the looming perils of climate change, water scarcity, energy availabili­ty, and a host of other external factors.

Above all, our long-term economic performanc­e will depend on the quality and strength of our economic and social policies across all dimensions, including fiscal and financial management, foreign trade, education and health, employment, industry, agricultur­e, infrastruc­ture, urbanisati­on, and overall governance, law and justice. History has shown that sustained rapid economic developmen­t is a hugely complex and arduous enterprise, with a great deal of luck and circumstan­ce thrown in.

It is against this background that we await the government’s long-term plans and policies to achieve the worthy goal of a developed India by 2047.

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 ?? ILLUSTRATI­ON: BINAY SINHA ??
ILLUSTRATI­ON: BINAY SINHA

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