Make or break in next 20 years

Nandan Nilekani        Print Edition: Jan 9, 2011

When it comes to predicting economic fortunes, what the crystal ball offers us is murky at best. From the perspective of the global economy, for example, 2010 turns out to be a sharp contrast of the world ten years ago. The global environment today is as cautious and conservative as it was economically freewheeling and optimistic in 2000. It serves as a cautionary tale against interpreting our present mood - economic or otherwise - to project the future.

Nevertheless, I would say that India finds itself in an enviable position. In the last decade, it has emerged as a prominent global force, and is predicted to become the fastest growing economy in the world over the next decade. But it is possible for a country's promise to go unfulfilled. When we look at economic history, we are often biased towards countries that successfully leveraged their advantages for rapid growth - such as China, Japan, much of Western Europe and the United States.

However, several other nations rose for some time and looked set to expand rapidly, before policy missteps deflated their growth. Brazil and Argentina, for instance, only recently regained the economic heights they first experienced in the 1970s and early 1990s after falling back sharply into recession. The path to development is a protracted one, and requires steadiness and responsive policy.

Over the last ten years, India has begun to build the foundation for long-term, inclusive growth. Industry investment is growing fast. Spending on infrastructure has expanded considerably, and the cumulative investment in infrastructure between 2007 and 2012 could touch $500 billion. India's telecom revolution has become a means of empowerment, and created a base for delivering information and remote services to millions of poor across India. Welfare initiatives have focused on creating an expanded social security net, and the delivery of critical services - in employment, education and health - has improved steadily.

Sustaining this progress, however, will require India to respond to the 'Big Four' forces that are today re-shaping the Indian economy. The first of these forces is India's vast demographic dividend - its large pool of workers, and low numbers of dependents. These millions of young people undergird India's growth story, and set us apart from every other nation - by 2020 the average Indian will be 29 years old, compared to the average Chinese, who will be 37. In the next ten years alone, we will add 13 million people every year to our workforce. While the promise of such a young workforce is clear, we must also have enough jobs for it, as well as the systems to provide the workers with the skills they need to participate in the economy.

The second great force is India's large domestic economy, which displays deep, untapped potential - over 600 million people are in the "aspiring" class, who are now just beginning to see a growth in their incomes and starting to extend their purchasing power. The rise of such demand, and as a result the continuing expansion of the domestic economy, will be crucial to buffering India from shifts in the global economy.

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