Over the past three decades, India has outpaced many other global economies, propelling the country into the ranks of just 18 outperforming emerging economies that achieved robust and consistent high growth over that period. India’s real GDP growth has averaged 6.8 percent annually since 1992, with nominal per capita GDP rising 18-fold which stood at $ 2,277 in 2021 .

The GDP growth has been inclusive translating into significant improvement in living standards. In just the decade between 2005–06 and 2015–16, about 270 million people were lifted out of extreme poverty. About 95 percent of households had access to electricity in 2018, up from 72 percent a decade earlier, while almost 100 percent of the population had access to basic sanitation as of July 2019. The share of Indian adults with at least one bank account has more than doubled since 2011, to 80 percent in 2017, driven by Jan-Dhan Yojana, a mass financial inclusion programme .

India’s scale is extraordinary. By 2025, one-fifth of the world’s working age population will be Indian. By 2030 there will be over 850 million internet users in India. By 2035 India’s five largest cities will have economies of comparable size to middle income countries today. It is the only country with the scale to match China .  India’s GDP growth has created a substantial and aspirational consumer-class and since household consumption accounts for 60 per cent of India’s GDP, is an important source of optimism for growth in the Indian economy.

Amongst the components of India’s GDP , Consumption is the main driver accounting for about 60% of GDP followed by Investment at about 26% and Government spending 12% with a negligible negative impact of net exports ( imports have been marginally higher )

Domestic Consumption is expected to grow into a $ 6 trillion opportunity by 2030 – factors which shall help this growth are a 1.4 Billion population which is younger and we shall see the growth in the upper-middle income and high-income segments, which will grow from being one in four households today, to one in two households by 2030. At the same time, India will also lift nearly 25 million households out of poverty, to reduce the share of households below the poverty line to 5%, down from 15% today .

Governments  push on infrastructure development directed towards development of roads , airports and ports and green energy shall boost construction activity and create new opportunities for business that shall in turn spur private investments . Growth in private investment will generate employment which is  essential for income distribution ; increased employment opportunities need to come from the manufacturing and construction sector where as services shall continue their dominant position in job creation .

India is on the cusp of a transformative decade :

• Infrastructure is crucial. Lack of robust infrastructure is often recognised as the primary growth constraint ; With the right infrastructure private investment shall significantly increase and also will help attract FDI as it happened in the case of China. To give a boost to infrastructure development the Indian government is increasingly looking to the private sector for forging partnerships via effective models for co-working between public and private sectors . The National infrastructure pipeline is a step in that direction . It was launched with 6835 projects and has now been expanded to cover 9335 projects with a total capital outlay of RS 108 trillions up to 2025 .The national highway network is over 50% longer than it was in 2014 . The number of domestic air passengers has doubled; air-freight volumes are up by 44%. There are more than three times as many mobile-phone base stations, supporting 783m broadband subscribers.  The Government has launched the PM Gati Shakti program which envisages the National Industrial corridor development and would cover the entire country with world class industrial cities seamlessly connected .

• Single National Market : A huge obstacle to trade between states has been removed by the adoption of a nationwide goods-and-services tax (gst) in place of umpteen local levies. This would surely contribute to efficiencies as consumers get access to the cheapest produce across the country thereby promoting national trade . Receipts from GST reached the equivalent of 8% of monthly GDP in April 22. This is also helping in formalizing the economy .
• National Digital infrastructure has helped in financial inclusion of all segments of society ; the Jan Dhan Yojana enabled millions to open bank accounts ; Aadhaar has provided Biometric identity to all Indians and successful launching of the National payment system called as UPI has curbed cash transactions and made doing business easy particularly for the small traders .Payments via UPI have risen from the equivalent of 13% of monthly GDP in January 2020 to 50% in April 2022.  Both of the above is making tax evasion harder. This has also contributed to increased efficiency and productivity . Another positive fallout of digitisation has been DBT – the transfer of government subsidies directly to the bank account of beneficiaries .
• Move in supply chains from China – many multinationals have adopted the China+1 strategy to spread the operational risk in supplies which were affected earlier during the SARS and more recently during the COVID epidemic . Another reason is the increasing cost base in China where labour costs are rising ; Geopolitical reasons are not far behind with the tensions between US and China which is prompting a move away from autocratic regimes . India has been quick to woo these companies with benefits such as the Production Linked Incentive scheme which now covers 14 sectors and for which the Government has committed $ 26 Billion in subsidies over the next 5 years .The taxes for manufacturing companies have been considerably lowered .Samsung from South Korea and Foxconn from Taiwan are taking benefit under the PLI scheme .India along with Vietnam have been the two main beneficiaries of Apples strategic shift of some of its manufacturing from out of China ; the growth in the large consumer class in India will also provide a ready market for companies which prefer to manufacture locally as Apple has witnessed now .

• As government promotes manufacturing large corporates with strong cash flows are willing to plough back their profits into risky investments . The four ambitious corporate giants comprising of Reliance , Adani , Tatas and JSW plan to invest over $ 250 Billion over the next 5-7 years . This has the risk of concentration of economic power with a few ; McKinsey corporate study states that profits are concentrated within a few large firms. As per their analysis just 20 of the country’s roughly 600 large firms contribute 80 percent of the total profit of large firms. However there are distinct benefits to the economy from large firms , their labour productivity is 11 times higher than that of the overall economy. They are 2.3 times more productive than midsize firms (revenues between $40 million and $500 million), and their profitability is 1.2 times greater. They account for almost 40 percent of total exports and employ 20 percent of the direct formal workforce. They provide jobs with better benefits than other companies do . However India needs to grow the number of large firms , midsize firms and the number of small firms .
• The growth in the number of firms and their size can happen with the ease  of doing business getting better ; some of the present constraints for business need to get addressed  a) Limited efficiency in import and export process b)Difficulty and time consuming process in obtaining construction permits c) Elaborate compliance process for tax payments d ) Long period for granting of patents e) Low recovery rate for insolvencies f) Lacking in judicial capacity to enforce contracts .

• Services have been the mainstay of India’s GDP contributing about 55% ; IT & BPO services are continuing to contribute significantly to growth with annual revenues of $ 230 Billion . With the advent of cloud computing the growth trajectory shall continue upwards however India is falling woefully short of skilled manpower.

• The development of engineering skills , growth in internet and mobile usage and availability of venture funds has created a lot of start ups . A total of 107 start ups have entered the Unicorn club raising more than $ 94 Billion . This would help attract FDI as well as generate employment opportunities .

• A young demographic with a mean age of 27 translates into more working hands .India’s growth path will be driven by how effectively it harnesses and rewards the efforts of its greatest natural asset – its people. The United Nations projects that India’s urbanisation rate will rise to 42 per cent by 2035, lifting the urban population from 64 million in 1950 to 640 million .India has the second largest population in the world with more than 1.3 billion people. Of India’s 29 states and 7 union territories, 18 are home to more people than Australia. India’s largest state, Uttar Pradesh, is bigger than Brazil, the world’s fifth most populous country. The Indian universities are churning out  thousands of graduates however they are lacking employable skills. People with primary skills such as carpenters , plumbers , cooks , masons will get absorbed in the growing economy however the people with secondary skills who are degree or certificate holders would lack behind as they lack employable skills . This needs to change or India would not be able to get the benefit of its demographic dividend . Here India can take a cue from China and open up its universities and invite the highly qualified diaspora based in advanced economies to teach in Indian universities .

• It is estimated that India would have 90 Million more workers looking for non farm jobs by 2030 – this would mean creation of 12 million jobs annually .The manufacturing and construction sectors need to grow the most while knowledge and labour intensive services need to maintain their growth momentum – to generate the required employment .India would need to promote manufacturing of Capital goods , electronics , chemicals , auto and auto components , EV’s & Batteries , Pharmaceuticals and Textiles . Under construction India needs to promote Mass Housing & Mass Transport ; Labour intensive sectors such as Retail , Ecommerce , supply chains , logistics and Tourism needs to grow to promote employment .

             How would all of this get funded :

• India would need about $ 2.4 Trillion up to 2030 assumed at 9% growth . A large portion of this could come from increased domestic savings which need to be directed toward financial assets such as shares , debentures , Insurance and pension and not towards holding of physical assets as land and gold . This will help deepen the capital market which shall result in reduced cost of borrowing and feed the growing appetite of new business development  .
• Capital which seeks good returns shall get attracted to India and with India emerging as an alternate supply Chain base shall increase the Net Capital inflows into India which could go up to about $ 200 Billion up to 2030 .

Since we started off this discussion comparing India’s development with that of China let us conclude with the unique challenges that India faces :

1. A Strong leader in Deng Xiaoping was instrumental in China’s phenomenal growth; Would Narendra Modi be India’s Deng ? With his present popularity and the lack of any credible opposition leader Modi’s third term is more or less assured . However Modi has been accused of divisive politics and his popularity is significantly higher amongst the Hindu population which comes at the cost of alienation of other minorities .Can PM Modi truly follow Sabka Saath Saabka Vikaas ? It seems doubtful considering the larger agenda of the BJP of promoting Hindutva ; it would be essential for the leader to take everybody along to unleash the animal spirits .
2. China was able to direct its resources in a focused manner through competent state institutions . The present dispensation under PM Modi has demonstrated its ability to get projects executed successfully as it did with providing Biometric identify of Aadhar to all Indian an herculean task by itself . Many an initiative which was taken by the UPA government has been successfully executed by the NDA . Further PM Modi is not corrupt and has largely curbed corruption at least at the highest echelons of the government and this would ensure that there is no loss of scarce resources  .
3. China’s single party state gave it political stability . Would  the Bhartiya Janata Party continue to be the single largest party and thereby provide political stability ? Compulsions of vote bank politics would prompt the BJP to keep playing the Hindutvata card creating divisiveness . Also the ugly fallouts of the dominance of a single party and the absence of any credible opposition has resulted in hubris within the ruling party and muzzling of democracy . This needs to change or it could prove detrimental to development particularly for attracting FDI .
4. The NDA under PM Modi has delivered well on various welfare programs such as the Ujwala Yojana , Faisal Bima Yojana , Stand Up India , Kissan Samman Nidhi , Awas Yojana , Atal Pension and others which have benefited the poor and needy . While the benefits of development would take its time to trickle down these various schemes are helping taking the most needy along .
5. For India to attain its development goals the states too need to contribute . We are already witnessing healthy competition between states to attract investment .This augurs well . However political stability at state level is essential and a strong central government needs to desist from toppling duly elected state government by means fair or foul which we have been witnessing .
6. In the ultimate analysis communist China has delivered and raised the per capita GDP to $ 10,000 but it has come at the cost supressing all dissent and under a surveillance state . India’s is a vibrant democracy , it soon shall have the largest young population in the world and irrespective of political affiliations one hopes the young voter shall choose a party and a leader who can deliver on development ;  and if that leader is the one who takes everyone along we are all winners .

India’s success will have significant implications for its international economic and strategic weight. In 2035, the global economy is likely to be increasingly weighted towards Asia, as India, China and the ASEAN economies catch up to slower-growing advanced economies. Even with an average annual growth rate of only 6 per cent, India’s economy would be more than two times larger than it was in 2017. In PPP terms, India’s share of the global economy will likely increase from 7 per cent in 2016 to around 13 per cent , making it one of the major poles of global economic power and on par with the United States