Can the elephant take-off?
Does our economy have the potential to show the fastest growth rate among the major global economies? Will GDP growth in India ever match the scorching pace set by the East Asian tigers during the 1980s? Even as these issues continue to be debated with vigour and passion, a recent Goldman Sachs report has added a new dimensions.india Updated: Nov 22, 2003 16:19 IST
Can the elephant become a jaguar? When will the Indian economy finallytake off? Will GDP growth in India ever match the scorching pace set by the East Asian economies during the 1980s? Will India become an economic superpower? These questions have dominated economic thought in India since the beginning of the reforms programme in 1991.
Even as these issues continue to be debated with vigour and passion, a recently published Goldman Sachs report has added a new dimension to the discussion. According to the report, India could become the third largest economy in the world after the US and China in the next 30 years, and will in the process overtake the giants of today's global economy-France, Germany, and Japan.
The report has further projected that India has the potential to show the fastest growth rate among the major economies (US, UK, Italy, France, Germany, and Japan) countries over the next 30 and 50 years. By 2050, India will be the only large economy in the world, with an annual growth rate of more than 3 per cent. If these projections turn out to be correct, India will become an economic superpower in one generation.
Sachs Predicts Success
The remarkable point about the Goldman Sachs projections is that they are based on modest growth assumptions. Most economists and policy makers in India have continuously harped on the fact that for India to become a prominent player in the global economy, it will have to achieve 7-8 per cent GDP growth on a sustained basis for the next 25 to 30 years.
|By 2050, India will be the only major economy in the world, with an annual growth rate of more than 3 per cent. If these projections turn out to be correct, India will become an economic superpower in one generation.|
The Goldman Sachs report, on the other hand, has based its projections on a modest 5.5-6 per cent growth over the next thirty years. In other words, it is saying that 30 years of 5.5-6 per cent growth will make India the third largest economy in the world.
And remember, this 5.5-6 per cent growth, which conventional wisdom has dismissed as unsatisfactory, will be more than any other major country in the world, and enough to make India the fastest growing economy out of all the major countries. May one dare say that the elephant need not transform itself into a jaguar to become an economic superpower.
Beware of complacency
Of course, there is no guarantee that the global economy over the next 30 to 50 years will run as per the Goldman Sachs script.
Economists have begun pointing out flaws in the methodology used in the report. And under no circumstances should projections such as this lull us into any false sense of complacency, and be used as an excuse to postpone painful second-generation economic reforms. It is also important to remember that even if the Goldman Sachs scripted scenario turns out to be accurate, India's per capita income will be less than all other major economies of the world.
Nevertheless, the fact that India is set to emerge as akey player in the world economy is undisputable. Enough data, apart from the Sachs report, is available to support this fact. From the 1990s, India has been one of the fastest growing economies in the world, and in the last few years, even though the Indian economy has experienced turbulence, its rate of growth has been second only to China.
Ready to Leap
It has emerged largely unscathed from the East Asian economic crisis of the 1990s, as well as the economic slowdown that has engulfed the US and other parts of the world since 2001.
|And under no circumstances should projections such as this lull us into any false sense of complacency, and be used as an excuse to postpone painful second-generation economic reforms.|
Sixty per cent of the Indian population is under the age of 25, and unlike the developed world, which is facing the problem of an ageing and shrinking population, both workforce and consumers are available here in plenty. Finally, with a vast pool of 18 million graduates and 2 million engineers, India is well poised to flourish in a knowledge based global economy.
The emergence of Indian economy will have profound implications on investment, demand, consumption and pricing patterns across the globe. Equally important, when a country of India's size and population becomes an economic powerhouse, it will result in a tectonic shift in geopolitical equations. Is the world ready?
(The writer works as a Consultant with the Confederation of Indian Industry, New Delhi)