The India Growth Story
Spurred by the embrace of new-age tech and the expanding opportunities of India’s businesses, the country’s economy has finally started spreading its wings
BY ANAND RATHI FOUNDER AND CHAIRMAN, ANAND RATHI GROUP
ACCORDING TO THE seminal work of the late economist Angus Maddison on the economies of previous eras, India was the largest economy of the world between 1 AD and 1700 AD—85 per cent of the time in the past 2,000 years. It accounted for anywhere between one-third and one-fourth of the global GDP during this period. But systematic exploitation during the colonial rule resulted in rapid deterioration and by Independence, India’s share in global GDP had shrunk to 1 per cent. Now, over the past 30 years, India has made rapid progress and restored part of that lost glory.
Today, it accounts for nearly 4 per cent of the global GDP in terms of market exchange rate and over 7 per cent by purchasing power parity. India’s global ranking by the economy’s size has also improved from 16th in 1996 to fifth in 2021. Since 2015, India has almost consistently been the fastest growing major economy. According to projections of the IMF, the country is likely to maintain that position till 2027.
Today, India has the secondlargest agriculture-, fifth-largest manufacturing- and seventh-largest services sectors. Among systemically vital countries, it has the fourth highest investment rate and the fifth highest savings rate while its consumption spending is seventh highest. Its progress over the past three decades has not remained confined to the economic sphere. There has been all-round growth in sectors such as infrastructure, defence, financial inclusion, education, healthcare, gender equality etc.
Over time, India has created a diversified manufacturing base. A large part has been driven by old sectors like construction, engineering goods, consumer staples, automobiles, etc. Despite these achievements, India’s success has been less pronounced in three crucial areas.
First, the share of manufacturing in GDP has not crossed 20 per cent.
With increasing automation, job creation in core manufacturing activities has remained limited. Due to its limited expansion, relatively high-paying and skill-intensive job creation in India’s formal sector has not kept pace with the rising workforce. Second, India’s foray into the hi-tech, high valueadded and globally oriented sectors with significant economies of scale has remained limited. Such industries have helped foster industrialisation elsewhere. But India, unlike China and many East Asian economies, has missed out on this. Third, limited access to foreign capital had increased the cost of funds and thereby fixed capital formation was constrained.
But over the past 30 years, the culmination of several seemingly separate factors has steadily changed the scenario. Since the early ’90s, India has embarked on the path of economic liberalisation. Despite several regime changes and the occasional political instability, none of the successive governments have reversed any major reforms initiated by their predecessors. By increasing the scope for private entrepreneurs to shape the economy, the government has enabled Indian industry to better align with the underlying national and international demand. It has also enhanced access to global finance, tech and collaboration. By providing the necessary structure, the government has played a supportive role in this. More recently, programmes like Make in India, Aatmanirbhar Bharat and production-linked incentive (PLI) schemes are further harnessing the entrepreneurial drive of Indians.
The invention of the steam engine started the first industrial revolution, followed by electric engines that led to the second one. The third revolution was characterised by the use of microchips. For different reasons, India was caught on the wrong side of the first three industrial revolutions. Currently the world is undergoing the fourth such revolution. It started with the rapid progress in information communication technology (ICT). This eventually led to a cyberphysical interface in the form of vast interconnected information technology (IT)-operating technology (OT) networks. New disruptive tech such as big data, AI/ML and blockchain are deepening the process. The quick embrace of progresses in ICT by India coupled with the country’s demonstrated strength in IT has enabled it to become a prominent player in newage tech and industries.
A large part of India’s new-age tech initiatives are driven by start-ups. From hyper-local delivery to fintech, innovative use of AI and ML to the use of remote sensing for better cropping, genomics-based personalised healthcare to automated algorithmic trading, and social media development to online delivery of education, start-ups have taken leading roles in Industry 4.0. Many Indian start-ups have attracted global attention and funding, reached major scale and turned into unicorns. Faced with challenges from the start-ups, incumbent companies have also started embracing the new tech of Industry 4.0.
The government has also taken major strides in these areas, especially for creating digital infrastructure such as the Unified Payments Interface (UPI) that has spurred the digitisation of India’s financial sector. The innovative use of Jan Dhan bank accounts, Aadhaar identity cards and mobile connectivity (JAM) has brought India to the forefront of digitised, transparent, real time and targeted delivery of welfare initiatives in a cashless manner. Such initiatives have also vastly expanded the reach of financial inclusion.
The combination—of rapid economic progress, India’s ascent in new-age industries, the global ‘China plus one’ strategy in supply chain sourcing and increasing global interest in India’s growth story—have enhanced access to foreign capital and tech. With these, India is now creating a major industrial base in hitech industries in sectors such as consumer electronics, mobile telephony, semiconductors, electric vehicles and solar panels and other renewable energy ecosystems. Among digitised services, India’s position is getting strengthened in skill-intensive areas like customised software development, fintech, BPO/KPO, financial algorithm development and R&D relating to social media, AI and ML.
In today’s recession-threatened world, India offers the most exciting growth story. The ascent from an also-ran to the front runner has fortified India’s pivotal global position. The country is also being seen as an arbitrator between warring factions in the western world. From the chief executives and board members of some of the world’s biggest companies, the Indian diaspora has now even spread to the White House and of late to 10 Downing Street. The symbolism of the turning cycle of time within 75 years of India’s independence can hardly be missed. India’s millennium has just started.
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In today’s recession-threatened world, India offers the most exciting growth story. The ascent from an alsoran to the front runner has fortified India’s pivotal global position