The Leader and the Sign of the Times
Last month’s Sign of the Times benchmarked the economic performance of the current government against both its Congress and BJP predecessors over the past 25 years. Among the key takeaways of this analysis was the observation that there have been a number of Indian governments that have delivered growth and Mr. Modi’s government benchmarks well relative to them. Mr. Modi’s supporters believe that his government’s policies are the basis of sustainable growth trajectory based on having laid the foundation for a structural step-up in the country’s development. India’s macro-economic drivers – its population, demographics, urbanisation trends, education, among other major factors – point to a country with double digit GDP growth potential under a government with the right policies and economic development strategies. While previous governments have briefly achieved these growth rates on the back of massive stimulus or global economic booms, neither party to date has been able to construct an economic strategy or model that has delivered this growth consistently or sustainably.
As mentioned in last month’s Sign, voters in next year’s general election will need to form a view on, among other things, the economic agendas of the different parties to determine who can better pick up where the current government will have left off. Real leadership is more likely based on a clear vision of an India that has realized its potential and clarity on the political, social and economic components that will deliver this vision. India’s model will need to do more than simply deliver increased growth rates: it will need to respond to and where possible leverage the major geopolitical, economic and technological shifts underway and place the country into a position of strength in a world that is currently witnessing the passing of its current world order and the longer-term shift from the industrial to the information age.
The Indian general elections – the “world’s largest exercise in democracy” – will take place in a little less than a year from today with an electorate larger than that of all 34 OECD countries combined electing their parliamentary representatives. In the previous 2014 election, voters backed Mr. Modi’s promises of reform and his track record of delivering rapid growth in his home state. Economic growth and reforms again promise to be the key issues of the upcoming election, and the assessment of Mr. Modi’s economic performance is at the epi-centre of the narrative for both the BJP and the opposition.
In 1991, India opened its economy to the rest of the world and reversed decades of slow and insular growth implementing a series of far-ranging reforms. There have been ups and downs in the years since; today however, a little over 25 years later, the effects of this liberalisation are clearly visible with India enjoying an increasingly vibrant domestic economy, a large and rapidly growing middle class, significant foreign investment inflows, and a high degree of political stability. Following one of the down swings, recent changes by the current administration have recovered some of the economic losses of the previous one and placed the India story back on the agenda of international investors. As the fastest growing and currently sixth largest economy in the world, India appears set to become a top three global economy and a middle-income country over the next c.25 years. This economic growth is set to transform the country, its society and its place in the world, creating a prosperous democracy of 1.4bn with a diversified and globalised economy. This month’s Sign of the Times plots India’s projected journey through to 2040 across five key economic and social metrics, benchmarking the country’s transformation to a series of global comparisons.
One year ago, the Sign of the Times laid out what we believed were 12 ‘certainties’ that had the potential to transform India by 2025, based on a number of broader demographic, social, economic, and political macro-themes. These ‘certainties’ of India have the potential to create the next big global player in economics and politics. A closer look at the ‘certainties’ however reveals that while some of them were indeed certain, particularly those related to demographics, others among the 12, such as the economic predictions, were directionally correct but more dependent on India getting key policy actions right along the way, as was highlighted in the Sign at the time. Next month’s Sign of the Times provides the key economic metrics and their impact beyond 2025, up through the point when India can be expected to emerge as a middle-income country around 2040. In addition to benchmarking the rate and scale of change to other middle income and developed countries, next month’s Leader will examine where the country is headed, both in terms of what India will look like and what its likely impact on the world might be. As a prelude to this analysis this month’s Sign of the Times revisits the original certainties and the policy priorities that will enable India’s trajectory and the transformation it will drive.