The world is experiencing unprecedented technologically aided changes leading to broad based growth and development. How will India benefit from these changes to improve its economic and social progress; say by the middle of the 21st century is worth pondering over.
The structure of global competitive economy was such that India was the seventh largest in terms of volume of output at the time of its Independence. The British popularly identified India as the ‘jewel in the crown’. India during the medieval period was one of the largest economics and in league with China and Europe. The desire to exploit the riches from India was so great that Christopher Columbus’s voyage in an effort to find an easy sea route for trade moved westerly and discovered the Americas instead. Yet at the time India became Independent, not only two-thirds Indians were unable to fend for two square meals a day, but also that it hosted the world’s largest pool of poor and illiterate population. Although, India still hosts the world’s largest pool of the poor, proportionately poverty has declined substantially. Using a standard methodology for comparisons over time, one can argue that proportion of the poor in India is around 30%, in spite of the population almost doubling to doubling to 1130 million since the Independence. In absolute numbers however, about 350 million citizens are still poor, comparable to those existed during 1950s.
Since the mid-1980s, especially after 1991 India reformed its economic policies and striving to achieve new benchmarks, recording a robust GDP growth rate averaging close to 7.5 % over the last decade and even touching 10% during the recent quarters. Further, there are noteworthy improvements in literacy, life expectancy, infant and child mortality and other human development parameters; broad based public policies are in place so as to reach out to the deprived and hitherto excluded communities such as the Scheduled Castes, Scheduled Tribes and religious minorities.
But the puzzle remains in the structure of the economy and sectoral shares of GDP. Early after the Independence over 60% of labor force was generating more than 50% of GDP from Agricultural and allied activities; but by about 2010 only 17% of GDP is generated with over 55% of labor force trapped in it. In recent years less than 20% of labor force is generating closer to 60% of GDP from services suggesting a technology intensive but labor replacing growth. The Industrial sector has grown in absolute terms but unable to improve its share in GDP of around a quarter and absorbing a similar share of labor. Such a growth trajectory can be devastating, since demographically by 2050, India will be the largest country in the world with a population of over 1.6 billion and a billion labor force. Compare this with China’s projected population at 1.4 billion and the next largest USA with just over 400 million by 2050.
The key is in the ‘capital stock’ a country would own, which is broadly referred to as that part of national wealth which is reproducible consisting of all resources contributing to the production of goods and services. This is an indicator of the capacity for investments determining future growth prospects. India is striving to ensure that real net capital stock is sustained which is about 252 per cent of the GDP, but this ratio is just about 50% in the US and 120% in Japan. In terms of per capita capital stock, in 2009, Japan tops with US$47711 followed by the USA at US$18708 and a meager amount of just about US$1500 in India. Thus India, while exhibits strength of the emerging economy so far as the capital stock is measured relative to its GDP, but in per capita terms it is far too low. Therefore, India’s future economic growth depends upon the investments made by developed economies around the globe through the FDI and FII channels.
One of the distinctive achievements for India is that it has evolved as a robust electoral democracy that too with a considerable devolution of powers to the second- (States) and third- (local bodies) tier both in its rural and urban areas. This enabling environment will empower communities, women and the deprived groups and help a secular and equitable development. Yet India has to ensure considerable investments in mass education, skill formation, technical education and improvement of quality education. This alone will help the bulging working age population of future years so as to increase labor productivity. This will also help realize the demographic dividends through improved household consumption as well as enhanced public consumption, triggering accelerating effects. Further, a better educated and qualified workforce will be welcome world over especially by the ‘graying economies’ such as the western Europe, Japan and even to a limited extent China. Indeed, India has potential to be become a manufacturing hub rivaling China, and excel in exports in goods and services especially the IT based services, besides becoming the supplier of the skilled manpower to the world during next 30-40 years.