Time to look forward to 2047

A quarter-century later in 2047, India will undoubtedly be the third largest economy globally. But will it be a happy and inclusive country? Or will it be unequal and stuck in the middle-income trap?

Time to look forward to 2047

Ajay Chhibber and Salman Anees Soz

n 15 August 1947, at the stroke of midnight, Pandit Jawaharlal Nehru, independent India’s first prime minister, gave his famous ‘Tryst with Destiny’ speech to the Constituent Assembly of India. But a tryst simply means a dalliance, an assignation or a date. It is time, some seventy-five years later, to aim higher and try to ‘consummate’ that destiny.

Between now and 2047, some twenty-five years from now, India must strive to cross the so-called ‘middle-income trap’ and become an advanced, developed country. With a pandemic-ravaged economy and society, that path will not be an easy one, especially in a country with such huge diversity.

If India reaches an average yearly per capita income level of $12,500 by 2047—considered to be the cut-off to move from middle-income status to high-income status—roughly where Mauritius or Romania is today, with a projected population of 1.6 billion, it will be a $20 trillion economy close to the size of the US today. It will be an economic superpower.

Even if it achieves a level of income of $10,000, roughly where Mexico or Argentina are today, India will be a $16 trillion economy— the third largest in the world—but by no means will it be a happy country if it has their level of income inequality and, most likely, just like them, will be stuck in a middle-income trap.

The point is that, given its size, India is likely to be the world’s third-largest economy by 2047—but whether it will be a happy country, more inclusive, less unequal or go by way of Latin America remains to be seen.

Will India make the change for a better future? Yes, it will. But at what pace and for whom?

In a muddled-through, somewhat haphazard manner, India has, of course, made progress since the end of the British rule—certainly far better than the previous hundred years of that colonization. Most villages have been electrified; most of our children are going to primary schools in villages and urban slums, most people now use mobile phones, and road and highway construction, airports and ports have expanded to increase mobility across the country. Poverty, which had fallen by over 250 million, has risen again sharply due to COVID19, but this reversal is hopefully temporary as was the case during the GFC.

India’s ranking in global GDP rose, on the back of the 1991 reforms, as its GDP grew more than five times since then and a middle class of around 300 million emerged—about 25 per cent of India’s population—but so did inequality.

The share of income going to the top 1 per cent doubled from just over 10 per cent in 1990 to over 20 per cent in 2019 and the Gini coefficient, which was around 0.32 in 2000 and shot up to 0.48 in 2019, making India the second-most unequal country in the world after Russia. And COVID-19 has increased inequality—even further.

India has held together as a ramshackle, rambunctious democracy. But even that designation is under question by many inside and outside India, who feel it’s better termed an ‘electocracy’—where elections are held but is not a genuine democracy. The Indian growth model had run out of steam even before the pandemic. GDP growth had slumped back to Raj Krishna’s ‘Hindu growth rate’ of 4 per cent. Over 77 per cent of its workforce was in vulnerable employment—with no work benefits and no social security—as was cruelly exposed during the pandemic. Its demographic dividend is beginning to look like a demographic disaster.

Some argue that India genuinely and comprehensively reforms only when it faces a crisis. The politicians then act, as they fear losing it all. The crisis focuses the mind. The 1991 reforms, put off by at least a decade, were surely triggered by a massive balance of payments crisis. But the 2008-09 GFC which hit India, did not trigger reforms—instead, India opened the fiscal and monetary spigots and spent its way out of that crisis. And that high fiscal spending and loose monetary policy generated massive inflation and a huge rise in bad loans in the banking sector—which India is still grappling with.

The Modi government’s recent reforms include an IBC and GST. The IBC is now frozen due to the pandemic—but was struggling even before the pandemic, as its resolutions were challenged in courts. The GST remains bogged down with implementation issues and the halfbaked farm and labour laws are being strongly opposed. And rising protectionism from 2018 onwards is even reversing the reforms that India benefited from since 1991 and is potentially cutting itself off from GVCs.

India’s political class must broaden its goals and create a new economic and social vision, instead of weakening institutions to serve narrow political goals, and creating divisions in society to pit one group or religion against another. Unshackling India from its interventionist state, allowing young, aspirational India’s innovativeness, flair and talent to be nurtured through better education and health systems, and building resilience with better preparedness for threats from climate change, natural disasters and pandemics, with robust social assistance and insurance systems must be the way forward.

But how to motivate the country to get all this done?

Many countries have used external threats to spur reforms. Over 150 years ago, the US used the threat from England to spur reforms. Japan and Germany used the need to rebuild after suffering enormous devastation after World War II. China used humiliation from Western colonial powers as a unifying sentiment to sustain development and South Korea and Taiwan used existential threats from North Korea and China to modernize and develop. What can motivate India in the twenty-first century to rise after this devastating pandemic?

What India needs is an aspirational goal GDP targets—$5 trillion or even $10 trillion—do not inspire the broader citizenry. China is a huge threat, so catching up with China could be one motivation. While China’s economy has done well—its social and political development hardly warrants emulation. For India to becoming a developed country—in all aspects, economic, social and political—by 2047, the 100th year of its independence, could be such a goal. ‘Samriddh aur Sajit Bharat @100’ (Prosperous and Inclusive India @100) is a slogan all political parties could sign up to. India Inc. should aim to grow at home and abroad instead of looking for tweaks in tariffs and regulations to serve very narrow short-term interests.

India has many individual inspiring stories—soldiers who fought bravely, sportsmen and women who persevered despite adversity and entrepreneurs who have built businesses despite all odds. But to become a developed country, India’s institutions need bolstering so that collectively India can propel its individual genius and strength into countrywide progress and prosperity. French Emperor Napoleon said it best: ‘Institutions determine the destinies of nations.’

Bending the arc of India’s trajectory over the next twenty-five years—when India will celebrate 100 years of independence— will surely make India an economic power of the twenty-first century—but also a much happier country that all Indians deserve.

Let the pandemic wake up the country to make a resolute change for that much-needed metamorphosis if India is to consummate its destiny that started with a tryst on 15 August 1947.

(Excerpts from ‘Unshackling India’ (2021) published by HarperCollins)

(This article was first published in National Herald on Sunday.)

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