Two days before, France defeated the courageous Croatia in the FIFA World Cup final last month, India beat France to become the world’s sixth-biggest economy. Pushing France to the seventh position, according to the updated World Bank figures for 2017, India’s gross domestic product (GDP) amounted to $2.597 trillion against $2.582 trillion for France. Having doubled its GDP in less than a decade, India is expected to power ahead as a key economic engine in Asia.
According to the IMF, India is projected to generate growth of 7.4 per cent in 2018-19 and 7.8 per cent in 2018-19, against the world’s expected average growth of 3.9 per cent. At the end of last year, it was predicted that India would overtake both France and Britain this year in terms of GDP, and has a good chance to become the world’s third-largest economy by 2032. However, Britain is still the world’s fifth-largest economy with a GDP of $2.622 trillion. The US is the world’s biggest economy with a GDP of $19.39 trillion, followed by China ($12.24 trillion), Japan ($4.87 trillion) and Germany ($3.68 trillion).
The headline GDP number for India points to a rapidly growing economy, but a deeper look at the numbers tells a different story: a story of poverty, less average prosperity than those in some of our neighbouring countries like Sri Lanka, Maldives and Bhutan and the overall growth not percolating down to those at the lower rung of economic layer. Though India has beaten France in overall GDP list, in per capita terms – which is the right way to compare, as it indicates average annual individual income and the standard of living – India is not only much poor than nine other largest economies, but still lags far behind France. A small country with population of 6.7 crore, France is an economic giant with GDP per capita at $38,476. In comparison, India has a population of 130 crore but its GDP per capita is only $1,940.
India’s per capita GDP is also nowhere near the top five economies in the overall GDP list. Even if India overtakes UK in the near future in terms of GDP, India’s per capita GDP will continue to amount to just a fraction of that of Britain, which is roughly 20 times higher. Leave aside the prosperous countries, while India’s population is second highest in the world, its per capita income is four times less than that of China ($8,826), the most populous country in the world. Whether a shade ahead of France or little behind Britain, while India’s population does make the economy bigger, it doesn’t help where it counts: the growth rate of the population and their socio-economic condition don’t make people better off.
Indian economy hasn’t had a bad year in this century. It’s been consistently growing between 6 and 7 per cent for more than a decade. This has brought a huge change in the world’s largest democracy. India started the decade behind UK, France, Italy and Brazil. Now it is trailing Britain, Germany and the big three of the US, China and Japan. One of India’s problems is its population: it is three times the population of UK, France, Italy and Brazil put together. But Brazil’s per capita is more than five times that of India. A 7 per cent economic growth breaks down to 5.8 per cent growth in GDP per capita with 1.1 per cent growth in population rate, which is among the highest outside Africa and the Middle East.
Indian economy is growing but what’s also growing is inequality. As resources and benefits are not being distributed fairly, India performs poorly on the Human Development Index (HDI), a UN metric that is the standard measure of quality of life across the world. On the HDI index, India is ranked 131, while some of our neighbours like the Sri Lanka and Maldives rank 73 and 105 respectively. Though for the longest possible time, India has held the unenviable record of having the largest number of people living in extreme poverty, the same has declined since the 1970s and has reduced at a faster pace after 1991-92. Thanks to the economic reforms that began in 1991, faster economic growth has lifted millions of people out of poverty. But despite the boom years, as former prime minister Manmohan Singh said in 2013, India remains a ‘poor country’.
Annual per capita income of $1,940 makes India a low-middle income country. A sustained growth of 7 or 8 per cent over the next decade will help take the country into middle income category with average annual individual income at above $4,500. Similar growth is needed over subsequent two decades to take India into the high-income bracket with per capita income at above $12,500. That’s a long road to traverse and quite a difficult task to achieve. But various studies suggest that by 2030 India could be a middle-income country and is likely to be the second largest economy by 2050. Though it is quite unlikely that India’s rise will be linear and uniform, experts are certain that the country is poised to emerge as a major economic power over the next three decades.
There are too many challenges to this growth narrative, though. The blunt GDP statistics do not capture the ground reality. India still suffers from enormous problems: grossly inadequate infrastructure, poor healthcare, growing inequality, poor education, deep skill deficit, patchy rule of law, poor governance, widespread hunger, massive unemployment and horrendous environmental degradation. In the earlier decades, issues around which political parties used to build their election campaigns surrounded the promise of basic necessities – food, clothing, housing, roads, electricity and water. That hasn’t changed much, though some issues like corruption, development and women’s safety have been added. This suggests that we are still stuck in basic issues of social and economic rights for bulk of the population.
However, it is also a fact that in the past 30 years, economic growth has generated huge wealth for a section of the population. It is likely that the coming decades will see more of the same if there is marked upgrade in the quality of governance, educational standards, healthcare and real growth in wages for workers and income for farmers. As India celebrates 71 years of independence tomorrow, there is much to rejoice and a lot more to do. Happy Independence Day!
The writer is an independent senior journalist.