Business Today

Generation G

What will it take for India, currently the 11th largest economy in the world, to become an advanced economy in one generation? This well-produced ADB study has answers that will be of interest and use to businessmen doing long-term planning.

Print Edition: April 4, 2010

The book divides 145 countries into four categories to demonstrate the difference between economies that are able to sustain a high GDP growth for more than a decade or two (a generation) and those who grow fast only for a few years. Some of the former countries (green colour) have converged with affluent countries over an extended period of time, demonstrating an ability to "catch up". The latter fall into a middle income trap (yellow). India has to avoid this trap.

To attain the kind of transition highlighted in the table on the left, the book says India has to manage three simultaneous transformations: becoming a more cohesive society, a globally competitive economy and a responsible global citizen.

The task list: Tackling structural inequalities, creating functioning cities, improving the infrastructure and creating a competitive edge, renewing the focus on education, technological development, and launching a revolution in energy. In that order.

The book premises that India could accelerate its potential growth to 8.5 per cent per capita for the next 30 years. With population growing at about 1 per cent, this implies a real GDP growth of around 9.5 per cent. At these growth rates, the Indian economy would increase by a factor of 19. In real terms it would reach $20 trillion by 2039—that's one-and-ahalf times as big as the US economy today. This long-term growth scenario is consistent with India's middle-term growth forecasts.

(All charts taken from the book. The book also explains in detail the agenda that will enable this transition by 2039.)

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