Let me begin by wishing our readers a very happy Christmas and season’s greetings. May Santa Claus bring us all the gifts of peace and prosperity. When we talk of prosperity — individual or national — a lot depends upon individual efforts as well as the socio-economic milieu. This socio-economic framework is heavily influenced by policies crafted by our leaders, elected or otherwise. Their success or failure can be gauged by the incremental prosperity they bring about at the national level as well as the individual level. The leaders who usher in maximum prosperity on a sustainable basis are the real Santa Claus for the country and its people.
The BJP has recently won three state elections. It has embarked on Viksit Bharat Sankalp (resolve for a developed country) yatras in these states. Prime Minister Narendra Modi has been assuring that by 2047, India will be a developed country.
But what is a developed country? Can India be one by 2047? The World Bank defines high-income economies as those with an annual per capita Gross National Income (GNI) of more than $13,846, upper middle-income economies between $4,466 and $13,845, and lower-middle-income economies between $1,136 and $4,465. India is today in a lower-middle income category. To become a high-income economy, it needs to cross the barrier of per capita GNI of $13,846 by 2047. To examine the plausibility of this, we need to look at three major indicators of prosperity — incremental increases in overall GDP and per capita incomes over specified long periods, changes in inequality of incomes in that country and the rate of overall inflation and exchange rate changes in the currency of that country.
Notwithstanding their limitations, these are key indicators that are used to track prosperity by multilateral agencies like the International Monetary Fund (IMF) and the World Bank. The latest report of IMF on India (2023) puts India in a very bright spot despite gloomy global conditions.
But let us look more deeply at the evolving increments in India’s prosperity. India took 67 years, from 1947 to 2014, to become a $2 trillion economy, as per the World Bank estimates. But during the 10 years of the Modi government, India will add another $2 trillion to become a $4 trillion economy by 2024. That’s a big jump in the overall prosperity of India. If the Modi government secures a third term, of which BJP feels pretty confident today, it is likely to add another $2 trillion in just 5 years, making India a $6 trillion economy by 2029. This progressive addition in GDP prosperity of $2 trillion each time, first in 67 years, then in 10 years, and then in just 5 years, is nothing short of a miracle. In purchasing power parity (PPP) terms, India is already a $10 trillion economy.
A major factor behind these rapid increments is the policy shift since 1991 economic reforms, which continued at varying speeds and shade under various governments. Even during Manmohan Singh’s period, from 2004 to 2014, GDP more than doubled from $0.71 trillion to $2.04 trillion.
The Modi government has given a big push to infrastructure along with providing basic facilities to people — these include toilets, drinking water, pucca houses under the PM Awas scheme and access to electricity. These assets have augmented welfare as well as growth in the economy. If one continues building on this and doubles up on human development through quality education and skill formation, coupled with liberal market policies, the dream of Viksit Bharat by 2047 could be within India’s reach.
At the individual level, however, prosperity is measured by per capita income. India’s per capita income increased from $624 in 2004 to $1,560 in 2014, and $2,411 in 2022. It seems a long way to the threshold entry point of $1,3846, designated for a high-income category. But one should keep in mind that per capita income increased by 2.5 times during the 10 years of Manmohan Singh government. If India can keep up that momentum over the next two and half decades, it can hope to reach the high-income threshold. Interestingly, in PPP terms, GDP per capita was already at $7,112 in 2022. One dollar in India can buy roughly three times more goods and services than what it can buy in the US. As a result, the headcount ratio of people in extreme poverty, measured at $2.15 a day (2017 PPP), has come down from 39.9 per cent in 2000 to 11.9 per cent in 2021.
However, many experts argue that per capita income may not reflect the real prosperity of people and inequalities in the economy are rising fast. How is India faring on that front? The Gini Index, which measures inequalities in income, was 34.4 in 2004 when the Manmohan Singh government took over, and this index is 34.2 in 2021, the latest year for which data is available. The income shares amongst population groups are more or less similarly divided as they were in 2004. Inequalities are higher in BRICS countries, especially South Africa, Brazil, and even China.
How about inflation and exchange rates? India’s inflation, during the Modi period, has remained largely within the RBI’s band of 4 per cent +/-2 per cent. It is lower than the inflation during the UPA period. And, with more than $600 billion in foreign exchange reserves, the RBI can avert any sudden depreciation of currency. All these factors have provided financial stability with high growth rates. If India stays the course, keeping Arjuna’s eye on growth with contained inflation, focusing more on investments and innovations than doles, its sankalp of Viksit Bharat can materialise by 2047. The only caveat is that there is no Covid type disease outbreak, or a major war, natural calamity, or political upheaval.
The writer is distinguished professor at ICRIER. Views are personal
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