The Leader and the Sign of the Times
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, the BJP's coalition, led by Prime Minister Narendra Modi, secured a large parliamentary majority on the back of significant voter disillusionment with the previous Congress-led coalition government which was plagued by several high-profile corruption scandals, which resulted in a sharp slowdown in both reforms and growth. Against this backdrop, voters backed Mr. Modi’s promises of reform and his track record of delivering rapid growth in his home state. Mr. Modi’s government inherited an economy which had slowed to c.6% and was out of favour with international investors and leveraged his party’s parliamentary strength to implement a series of reforms which helped revive growth to c.8%. However, two major back-to-back reforms – demonetisation and the implementation of a national goods and services tax – adversely impacted growth from late-2016 until mid-2017 and have contributed to anti-incumbency against the BJP which has suffered setbacks in some recent regional elections, in spite of growth recovering back to 7-8% levels over the last year. A previously fractured opposition of a weakened Congress and several regional parties has united (at least temporarily) to take on the BJP and appears to be gaining in recent opinion polls for upcoming state elections and hoping to post a credible challenge to the BJP’s majority in the general election next year. 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.
For almost 70 years the Commonwealth of Nations, formerly the British Commonwealth, has linked together one third of humanity in a loose confederation of states based on shared history and shared values. However, the Commonwealth project for decades has fallen short of its potential, due to both a lack of leadership and to the nature of the institution itself, being a free association of equal members with no permanent governance organs. Nevertheless, the economic, political and security potential of the Commonwealth remains considerable at a time when existing geopolitical alliances and institutions generally are in flux with a vacillating America and an increasingly assertive China. India, the Commonwealth’s largest and arguably most dynamic member, has seen its prospects and standing revitalised under the current government and therefore has an opportunity to step up and be one of the leaders in the transformation of the bloc into a positive force for development, security and prosperity in the world.