All the reasons for India’s economic boom
Today India's economy accounts for 3.6% of global GDP, but within a few years it could surpass the shares of Japan and Germany. Here because
The boom of the Indian economy is based on a series of favorable structural elements which will make Delhi an undisputed protagonist of future economic scenarios. These factors were recently summarized by the Economist in an article that effectively explains the secrets of a long-term success that will crown India as the economic queen of the planet.
India: the reasons for a boom
India's economic boom is there for all to see. It surprises if one only thinks of the starting conditions. In 1993, the Economist points out, India's GDP represented only 1% of the global one, but since then a growth trend has been triggered which has experienced new peaks after the first election of Narendra Modi in 2014. Today the economy India represents 3.6% of global GDP, the same level reached by China in 2000, but according to the IMF in 2028 it will reach 4.2% overtaking both Japan and Germany.
The forecasts for the distant future are even more rosy: according to Goldman Sachs, India's GDP will exceed that of the Eurozone in 2051 and that of America in 2075; all this on the basis of a growth rate estimated at 5.8% in the next five years, at 4.6% in the 1930s and at a lower level in the following decades.
The eyes of the world on Delhi
With these numbers, the fibrillation of global business is understandable, attracted by the many opportunities offered by the country.
After opening its first store in India, Apple CEO Tim Cook told investors last month that “the dynamism of that vibrant market is incredible. India is at a turning point”.
A few days later Taiwanese electronics giant Foxconn struck a deal to build a factory in India with an investment of $500 million.
The strong point is the manpower
The generous economic projections of banks such as Goldman Sachs are based in part on estimates of India's population growth.
For example, the OECD, recalls the Economist , predicts that while the labor force of the EU and China will drastically contract, that of India will continue to grow at least until the end of the 1940s.
This trend is worth a whole percentage point of Goldman Sachs' multi-year growth forecasts for the Indian economy.
Reliable infrastructure
If the eyes of global investors are focused on India it is also due to the improvement of its infrastructural networks, which have benefited from a rate of investments that has more than tripled, in relation to GDP, compared to ten years ago.
In the last ten years the length of the road network has increased by 25% reaching six million kilometres; the number of airports has doubled and many of the new ones are real gems that make those of rich countries pale.
Even the digital infrastructure has experienced a real flowering: today there are 832 million broadband connections. In the meantime, the digital services industry has experienced a mighty leap forward, with hundreds of millions of users of e-banking or telematic payment systems.
Even in terms of energy infrastructure, India knows how to be envied. In this regard, the Economist cites data from Bloomberg New Energy Finance according to which this year the country will generate the third highest amount of solar energy after America and China-
Make in India
It is in this favorable context that Prime Minister Modi's ambitious infrastructure plans, launched under the slogan "Make in India", take place.
The goal is to transform India into a production hub capable of attracting those Western companies wishing to diversify their production chains in the light of the Chinese risk.
Here the Economist reports the conclusions of a recent IMF study according to which India would be one of the main beneficiaries of the division of the world into two opposing geopolitical blocs, one led by America and the other by China. It is precisely to grab part of this cake that the Modi government launched a subsidy scheme for industries in 2020 which encourages production in 14 industrial sectors on the basis of a reward mechanism.
Delhi's plans are already having their effects: the export of machinery, electronics and cars or their parts has grown by 63% in the last five years, and this item now represents a fifth of all goods exported from India. Apple has recently landed in the country, where today it assembles 7% of its devices. Local players are also moving at breakneck speed: India's richest and most famous group, Tata, is investing in electronics at record levels.
The next step is the embrace of America
But are these growth rates, the Economist finally asks, really sustainable? The answer is that some of the factors underlying the Indian boom seem destined to last over time, with particular reference to demographic trends, the excellent cultural and educational level of the population and the entrepreneurial culture.
In next year's elections, then, everyone takes Modi's reconfirmation for granted, which will guarantee a precious element of continuity in the formulation of economic policies and above all in investments and infrastructures.
But the Indian economy could be shaken to its foundations by an entirely political variable, namely the choice to fully integrate into the Western economic and financial system. However, such a step requires a decisive approach to the US and India has been moving in that direction for some time also in the name of the common aversion to China.
In a few days, as it happens, Modi will be received with full honors in Washington, where for the second time, with a privilege previously reserved only for leaders like Churchill, he will formulate a speech to Houses gathered under the columns of the Capitol. And who knows if, in the intimacy of the oval office, he and Biden will have the opportunity to discuss that projection of Goldman Sachs which fixes the overtaking of the Indian economy over the US in fifty years.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/india-boom-economico/ on Sun, 18 Jun 2023 05:54:57 +0000.