The Leader and the Sign of the Times
India’s general election, the ‘world’s largest exercise in democracy’, is now underway with the first votes in a multi-phase process cast, with result to be announced on the 23rd of May. While opinion polls are projecting a wide range of outcomes, they currently favour a win by the incumbent BJP and its leader, Prime Minister Narendra Modi. If elected, Mr. Modi would be entrusted with the responsibility to lead India during one of the most critical periods in the country’s history. Following nearly two decades since India’s initial economic liberalisation, during which the country has seen strong, if volatile growth, India today is on the cusp of entering a new phase of growth that will take the country from US$3tn GDP this year to $5tn by the next general election in 2024. During this period, the country is set to undergo massive economic, political and social changes, and India’s next government will need to be the steward of this transformation for the country to meet its full potential and to assume a position commensurate with its rise in global significance. India’s likely trajectory over the next decade paints the backdrop against which both major parties in this election should be determining their government manifestos, driving important priorities like deepening reforms, attracting capital, increasing transparency and removing obstacles to growth. However, both the BJP and Congress appear to have incorporated these factors to only a limited extent in their public pronouncements, pursuing more traditional election strategies largely built around identity politics, recent track records, and criticism of their opponents. While they may have taken the view that these are the tactics that will lead to electoral success, India’s next government will ultimately need the vision and execution capabilities to steer India’s continued rise during its next phase of growth. Importantly, India’s growth and transformation are also leading to increasingly significant changes in Indian society, driving the growth of a rising new electorate, whose demands are closely tied to drivers of India’s rise, and who will extract the price from leaders who fail to be trustworthy stewards of that rise.
India’s economy is in the midst of a rapid transition and is expected to overtake the US in size by 2030. With its GDP projected to cross US$3tn this year and US$8tn within the next decade, this transformation is extraordinary in terms of both its scale and its speed, with India’s growth now accelerating faster than any other major economy’s. Last month’s Sign examined the key underlying drivers of India’s transformation – its favourable demographics resulting in mass-scale urbanisation, technology adoption, consumerism and financial inclusion – all underpinned by India’s representative democracy and the resulting peaceful development of its society. In absolute terms, India’s growth is comparable only to China’s, which underwent a similar transition from 2006-2014 as its GDP expanded from US$2.7tn to US$8.1tn. China’s growth transformed its industries, its capital markets, its society and its politics and also drove seismic geostrategic shifts that resulted in global political and economic realignments. India’s rise over the next decade is likely to drive similar domestic transformations, ending extreme poverty, creating a massive urban middle class, and scaling domestic companies into global leaders. However, even though India’s rise is widely expected to be peaceful, its emergence as a real economic superpower will also likely disrupt the global economic and political status quo, shaping and re-shaping regional and global power alliances over the next decade and beyond.
The crisis which unfolded between India and Pakistan in Kashmir at the end of last month captured the top of global news headlines, pushing aside the failed US-North Korean nuclear summit, the unfolding crisis in Venezuela and the unending Brexit. India and Pakistan carried out air raids inside each other's countries for the first time since the 1971 war and raised fears of a major military escalation between the two nuclear-armed nations. New Delhi and Islamabad also engaged in a battle of conflicting military claims, obscuring many of the facts around what actually happened for the domestic and global public. What is known is that the conflict was triggered by a terrorist attack on Indian paramilitary forces in Kashmir which killed 49 soldiers on February 14th. Jaish-e-Mohammed (“JeM”), an Islamist group which operates out of Pakistan claimed responsibility for the attack. This attack triggered a vigorous response by India, which launched an airstrike into Pakistan, allegedly on a large JeM terrorist training camp. While the narrative around events begins to diverge here, it appears that the Pakistani air force retaliated by sending aircraft of its own against targets across the Line of Control with the aim of targeting military installations, with the resulting engagement leading to the shooting down of one Pakistani and at least one Indian jet over Pakistani airspace, taking the pilot prisoner.
As the world’s fastest growing major economy, India’s GDP is on a path to overtake the United States’ and become the world’s second largest (behind China) by 2030 . India’s growth momentum today has reached a tipping point. It took India fifty years following independence from British rule to scale to a US$1 trillion economy in 2007. The next trillion, however, had been added by 2014, only seven years later, and based on its current growth trajectory, India’s economy is on track to cross US$3 trillion by the end of 2019. Further, the compounding effect of India’s rapid economic growth means that these time increments will shorten yet further, with the journey from US$3 trillion to US$4 trillion taking three years and the next trillion thereafter only two. With a general election scheduled for later this year, one can expect considerable debate about the policies that have helped, or hindered, India on its path. However, leaving aside the value destruction in the pre-Modi Congress government, when looking across cycles over the past 30 years or so, it is clear that governments under both parties have presided over periods of high growth. And while the economic policies and reforms implemented by particular governments have certainly played an important role, it is clear that the underlying drivers for India’s remarkable growth include some important macro-factors that have transcended governments’ priorities and policies; ‘Growth Beyond Policy’ is a key requirement for major economies, especially in these times where policy seems more partisan, confrontational and risky