India’s economic growth aspiration is no flight of fancy

It has been several decades delayed, but India’s moment may be arriving soon as it strives to become the world’s third-largest economy. Though India was a thriving global economy a millennium ago, its success drew colonisers who exploited the country for its riches until its political independence in 1947.

India’s economic independence is still a work in progress. The post-1947 economic journey of India can be broadly defined into three phases. The first phase was from 1947 to 1991, India had a command and control economy where the government dictated business decisions to licensed industrialists. This was also the phase when the foundation of industrial economy was laid mostly by government-run companies.

The second phase began with the delicensing of industry from 1992 onwards, leading to a series of reforms which brought in FDI in a phased manner. This phase enhanced private investment in diverse sectors like pharmaceuticals, insurance, automobile and retail. Infrastructure was improved but the investments were not commensurate with the needs of the economy. Roads and airports were opened to private sector while the telecom sector blossomed.

The third phase began from 2014 onwards, when India embraced the fourth industrial revolution and its suite of technologies. Foundational reforms were implemented that improved tax administration and significantly reduced the debt crisis in banking. The launch of Goods and Services Tax made India a single tax market in most products, triggering a huge shift in business practices while boosting national revenue. The Insolvency and Banking Code (IBC) gave teeth to creditors who could unseat promoters who had willfully defaulted on credit. As a consequence, gross and net non-performing assets (NPA) ratios have fallen from a high of 11.5 per cent and 6.1 per cent in March 2018 to 3.9 per cent and 1.0 per cent in March 2023 respectively.

The debilitating presence of crony capitalism was severely dented after bankers and promoters were held accountable under the IBC laws.

India is now the fastest growing large economy of the world. A decade of political stability and deepening economic reforms has propelled India to a position of strength. From being among the fragile five economies in 2014, India is among the top five economies of the world. US, China, Germany and Japan are still bigger, though the third slot is not too far away for India.

Quoting S&P Global Ratings, Reuters reported that India will remain the fastest-growing major economy for at least the next three years, setting it on course to become the world’s third-largest economy by 2030.

S&P expects India, currently the world’s fifth-largest economy, to grow at 6.4 per cent this fiscal and estimates growth will pick up to 7 per cent by fiscal 2027. In contrast, it expects China’s growth to slow to 4.6 per cent by 2026 from an estimated 5.4 per cent this year. “A paramount test will be whether India can become the next big global manufacturing hub, an immense opportunity,” S&P said in its Global Credit Outlook 2024 report, dated December 4.

In the current phase of growth, India’s rise to the third spot will be fuelled by digital technologies. Across sectors, digital technologies are allowing India to leapfrog ahead with innovative new policies. (Gulf News)

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