Transforming India’s Growth Model

Bullet Points October pic


leader picLast 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 realised 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.  This month’s Sign of the Times identifies and briefly explores ten political, economic, social and technological foresights on India’s future that any successful growth model will need to account for in order for the country to achieve its full growth potential and assume its rightful place as a major power in the world.


The Agenda for the Next Government

India has always prospered when its leaders have had the courage to open its markets internally and externally.  This was seen in the initial trade liberalisation in 1991 which helped stave off a balance of payments crisis, and in the early 2000s when India liberalised foreign direct investment and built out a number of sectors such as IT services, pharmaceuticals, telecommunication and financial services to global standards.  Taking a look across multiple previous governments, it is clear that much has been achieved in terms of major reforms[1].  Indeed, what seemed to be big changes at the time, has stood the test of time and still remains foundational; India required fresh and radical thinking to progress and build on those.  As an example of the magnitude of the challenge, in the next 10 years, India expects to add 140m to the population,  India’s urban centres are expected to grow by c.150m people[2], implying that India needs to create urban infrastructure equivalent to a new Mumbai every 15 months, provide quality secondary and tertiary education to c.120m students over the next decade[3] and generate c.17-20m new high-quality jobs every year to accommodate the shift away from agriculture and informal employment[4].  Double digit GDP growth for India therefore is not only an opportunity, but rather a necessity given its population and demographic trends.  While the reforms undertaken by the current government provide a starting point for such an acceleration, the next government will face a series of challenges to delivering accelerated growth, including:

Irrespective of the challenges, constructing an economic model for India that can deliver 10% growth needs to be a priority for any party at the helm, not least because delivering anything less will risk the wrath of voters.  In terms of designing and executing such a model, for much of the post-war period, conventional wisdom suggested that the path to high growth was to adopt the “Washington Consensus” model[5]: floating exchange and market interest rates, trade liberalisation, privatisation and deregulation, and the promotion of FDI.  The growing economic disparities in the western world combined with the growth of China (albeit with the support of the US and its allies) and its emergence as the world’s second economic superpower has since challenged this narrative.  China, by virtue of its scale, history, circumstances and the designs of the ruling communist party, embarked on a different path encompassing tight capital and exchange rate controls, government control over markets and the banking system, significant state participation in key sectors and authoritarian population control.  China’s evident success with this model however does not invalidate the prevailing liberal markets model.  Indeed, without access to the liberal markets around the world for foreign investment and exports, it is doubtful that it could have succeeded at all.  China’s success does demonstrate that there is more than one way to achieve success in designing an economic model, and more importantly, that countries need to adopt models that fit their specific circumstances and the times they live in.  India, spanning an entire subcontinent and soon to be the world’s most populous country, will need to construct a development model that accounts for its size, its cultural and economic diversity, its historical context and is fit for the world we are about to enter.

So, stepping back, India’s development model will also need to weather a series of global disruptions and trends that seem part of a larger set of forces that is reshaping the world.[6]  The Western liberal order that has defined geopolitics and geo-economics since the Cold War is under internal and external attack and appears to be entering a potentially terminal decline; China is rising as an increasingly powerful and assertive second superpower in what has been a unipolar world for the better part of three decades; globalisation in the form of free trade and international investments faces a backlash in both the developing and the developed world, and; perhaps most fundamentally, the world is seeing massive technological, economic and social dislocations in the transition from the industrial to the information age.  India’s future model will not only need to insure the country against the disruptions and dislocations caused by these trends, it will need to leverage them in a transformative fashion if India is to come out of the right side of the global reordering underway.  To summarise, from India’s vantage point, the world may become less liberal and there may be more barriers for most to access global markets, but that is likely balanced in India’s favour as it is welcomed by the US, most of the “West” and most of Asia Pacific as a potential ally in the face of China’s rising geopolitical and geo-economic power.

India’s future model will need to successfully navigate between emerging certainties and risks and between shifting opportunities and challenges.  Looking more closely at the factors shaping India over the next decade, in the context of a developing world scenario, gives rise to a series of “foresights” on the transformations India needs to its economic model regarding India’s path across ten areas.



Table Indias Furture Model


1. Open Economy – Remove remaining barriers to competition

a. Why Does India Need it? With a population expected to reach 1.6bn by 2040, India needs rapid growth simply in order to provide the scale of economic opportunities required, and this can only achieve this by unleashing the full potential of its people, its entrepreneurs and its natural resources. India does not have the time to follow an incremental path, but rather needs to simultaneously open its economy to the world in multiple respects (internally and externally) to become a “multi-hub” nation by driving competition and entrepreneurship through investment, trade, and intellectual property development to create a new generation of globally-competitive Indian enterprises.

b. What Does Good Look Like? Good looks like India wide open[7] for business, removing the vestiges of insecurity that have haunted it.   In recent years, liberalisation and reforms by the Modi government have helped drive R&D investment to the required 2-3% of GDP (a target we put forward in India Wide Open) and FDI to c.1.5-2.0% of GDP.  India will need to further increase this level of R&D, while driving FDI significantly higher, from c.1.5% of GDP it has averaged over the past two decades to the 3.5-4.0% levels that China has was able to sustain over a period of 20 years (or c.US$150bn of FDI p.a. vs. c.US$60bn p.a. currently).  This will ultimately reflect in its exports which India needs to target increasing from 19% of GDP to the c.30% levels that China was able to achieve from 2003-2012 (see charts).


Net FDI inflows- Exports

c. Execution Considerations. A radical opening of FDI and trade as outlined above cannot be achieved by incremental changes which have been the norm since liberalisation began in the early 1990s, but rather through a simultaneous and radical opening of India across three critical areas which have held back foreign competition and domestic competition in the Indian market.  There are many areas of change required of which three are long overdue if India is to become visibly open.  Firstly, all sectors (barring only the most sensitive from a national security perspective) need to be opened to foreign and domestic competition with an efficient judiciary enforcing fairness, regulatory standards and transparency of business practices.  Secondly, the government needs to get out of the business of land ownership and offer land (at a token cost) to anyone, domestic or foreign, who can create employment using that land.  And thirdly, restrictions on private (for-profit) education need to be dismantled if India is to make its workforce globally competitive.


2. Hyper-Scale Mass Consumerism -Harness scale of mass consumerism as an engine for growth

a. Why Does India Need It? Despite a growing middle class (in relative terms), India still remains a poor country with a per capita income of US$2,611[8], average wealth per adult less than US$6,000[9], and consumption dominated by the basics needed to survive (food, shelter and energy), and more recently education, healthcare and mobile phones.  Discretionary consumption plays an important role, but only with a small sub-set of the urban population.  India’s challenge therefore is that it needs to create a mass market for in the delivery of consumer essentials, while simultaneously unleashing discretionary consumption in wealthier, urban areas.

b. What Does Good Look Like? Good looks like a consumer goods and retail sector which can simultaneously cater to the mass low-middle income market (benchmarks include China and Brazil) as well as a wealthier urban middle-upper class (benchmarks are OECD countries).  Good also means addressing the many supply chain and logistics inefficiencies and transaction costs, as well as the excessive rent seeking by middlemen.  With urbanisation, digitisation, the growth of the middle class and the increased nuclearization of families, India will over the long-term not only emerge as the largest consumption market globally, spending patterns will change significantly, providing new opportunities for businesses seeking to create and meet customer needs.


Final Household Consumption per Capita

c. Execution Considerations. Managing high income growth with low inflation is a pre-requisite to sustained consumption growth, and India will need to continue to open various consumer goods categories and the retail sector to both domestic and international competition and investment, while addressing structural supply bottlenecks which inhibit consumption.  The reasons for the continued dominance of an inefficient and sub-scale unorganised sector in several categories is also critical to address, along with the lack of adequate public pension, health and other social security protections which depress the propensity to consume.


3. Open Education – Convert unskilled labour pool into skilled human capital at scale

a. Why does India Need It? India education sector faces a number of structural challenges and lacks the capacity and quality across the value chain to adequately equip its vast population for the new economy.  There are five times as many primary schools as there are secondary schools, and the gap is further exacerbated by a shortage of c.1.4m trained teachers, particularly in the most populous states.  Challenges also persist in higher education and vocational training with only 20% of engineering graduates considered employable due to the lack of consistency and quality of higher education syllabuses, while the number of people enrolled in vocational training programs – 5.5m people – is a fraction of that in China (90m) or the United States (11m).

b. What Does Good Look Like? Good looks like India bridging the secondary and higher education gap within the next decade and reducing the proportion of young adults without upper secondary or higher education by c.75% to OECD levels, which would imply the addition of approximately 120m upper secondary and higher education students over the next decade (or c.1m per month).  Successfully addressing India’s education and training challenges could have a potentially transformative impact on the country’s labour force and allow it to be globally competitive across all fields of economic activity.

& of Young Adults

c. Execution Considerations. India cannot solve its issues with physical infrastructure alone.  Investment in capacity and quality is critical in order to bridge India’s education gap, and the government (including state governments) will need to work closely with the private sector and explore innovative for-profit models in K-12 in order to encourage investment, and new models to train teachers at scale.  Ultimately, digital platforms and technology are required to transcend physical boundaries deliver education at scale to millions, while ensuring that the accessibility, cost and quality of educational content delivered closes rather than exacerbates the existing gaps.


4. Digital Platforms for Everything – Digitally deliver finance, healthcare and other services to the masses

a. Why does India Need It? Across critical sectors such as banking, financial services and healthcare India faces a significant shortage of physical infrastructure with c.200m adults still without bank accounts, and India’s healthcare infrastructure (in terms numbers of doctors, nurses, hospital beds and pharmacies) significantly below global benchmarks.  India can now leverage rising internet and smartphone penetration to deliver key financial, healthcare and other services through scaled digital platforms which provide scale, speed and efficiency, and obviate the need for the excessive physical infrastructure which would otherwise be required to fill the gap.

b. What Does Good Look Like? Good can only be achieved if access is driven first. In the case of healthcare, this would mean improving access to healthcare to reduce the burden of disease, and ultimately increase life expectancy levels by c.10 years to reach the OECD average.  In terms of financial inclusion, the aim must be to further increase access to formal financial services while reducing the size of the cash economy to one in line with other emerging markets (implying a reduction in the cash-to-GDP ratio from 12.4% to 4.0%) to free up capital for productive investment.  In other areas, like urban infrastructure and access to other services, the principle must remain to leverage digital to improve access with increased capital efficiency (by reducing the need for physical infrastructure).

c. Execution Considerations. The transition from a physical infrastructure-led development model to a digital platform driven model at mass scale will come with a number of logistical and practical challenges.  These include coping with automation, the potential loss of jobs, bureaucracy and corruption.  However, there is an opportunity for India to push through these obstacles, seize the moment and set an example of mass digital transformation for the rest of the world.


5. Urban Density – Build world-class vertical cities to manage and encourage urbanisation

a. Why does India Need It? With over 200m people moving from rural to urban areas by 2040, India faces a major challenge to providing adequate housing and security to its citizens.  Current migration waves are driving increasing urban sprawl, congestion and slumification, at a significant economic and human cost.  India will need to design sustainable and efficient urban habitats that maximise the value of its cities’ human capital in a cost-effective manner if it is to unlock the economic and social potential of its growing urban environments, which will require a radical redesign of future cities based on high density habitats.

Density and Value Creation

b. What Does Good Look Like? In this case, “good” needs to recognise that India is will shortly host some of the biggest urban centres in the world.  High density urban areas are highly efficient in terms providing for people, driving economic activity, and in consuming resources.  This implies a required focus on vertical urbanisation, building cities up rather that out and reducing pollution, preserving greenbelts and rural urban transition zones, reducing the transportation and logistics costs, and deploying innovative technologies such as vertical farming to meet citizens’ needs in a more efficient manner.

c. Execution Considerations. While India’s mega-cities today are already densely inhabited, they face considerable infrastructure challenges and slumification, where political and legal restrictions hinder large-scale redevelopment. In the absence of “China style” solutions involving stamping new cities out of fields and mass semi-voluntary relocation, India will need to adopt and adapt a range of innovative building, logistics and communications technologies to introduce vertical solutions on its existing urban infrastructure.


6. Open Information Edge – Become a hub for global knowledge-based industries

a. Why does India Need It? The existence of a robust technology sector, with open information flows, is a prerequisite for India’s further development.  To date no Indian company features in the list of the worlds’ 20 largest technology companies (by market value), which is comprised entirely of US and Chinese companies, due to a number of factors including weak intellectual property and copyright protection laws and inadequate research and development (R&D) spending.  As a result, innovation and information exchange – two cornerstones of a successful open economy – are currently lacking in the country.

List of the Worlds most valuable technology companies

b. What Does Good Look Like? Good results in the build out of global scale technology giants.  For all its success in IT services (which has leveraged lower cost structures, rather than innovation), India has failed to create technology giants of its own.  Doing so will require the country to push its R&D spend to c.US$40bn annually (closer to China’s current research expenditure levels), create technology hubs which can attract global technology entrepreneurs (including Indian talent which has migrated to Silicon Valley and other tech centres), and support a conducive regulatory and venture capital ecosystem which encourages risk taking by young entrepreneurs without a safety net (as opposed to only the already wealthy).  India’s opportunity to change the status quo begins with introducing stronger IP protection laws, increasing government research grants and encouraging greater private sector participation in academia.  These improvements in innovation can then be combined with entrepreneurship, to create new companies that can service India and the world.

c. Execution Considerations. India’s build out of knowledge-based industries is part of the broader global transition from the industrial to the information age and other countries will not be standing still at this time.  The US of course remains the predominant technological and innovation superpower, and Chinese tech giants are increasingly looking abroad.  This means that for home-grown technology companies to build global scale, they will have to build strong globally-competitive intellectual property, choose segments within the knowledge services which play to its inherent advantages, while exploiting the global mistrust of China due to data privacy and intellectual property concerns to become the preferred global sourcing hub.


7. Open Democracy – Leverage democracy to drive reform, stability and growth

a. Why Does India Need It? India’s vibrant democracy enjoys a long stretch of stability and provides an outlet for protest as well as being an accountability mechanism for government actions, thereby creating the space for the country to manage the rise of prosperity and provide an alternative governance model to China’s authoritarian one for high growth countries.  While the direct correlation between democracy and economic development has been a thorny one, the correlations between democracy and education, human rights, happiness[10], and peace have been clearly demonstrated.  Further, democracy introduces accountability in terms of the delivery and quality of governance, and thereby reduces corruption[11].

Democracy and Prosperity- Freedom and Prosperity


b. What Does Good Look Like? No democracy is perfect.  By its very nature “it chooses banality over excellence, shrewdness over nobility, empty promise over true competence… it is eternal imperfection.”[12]  Further, India is already ranked as a ‘full democracy’ by most NGOs focusing on countries’ governance rankings.  At the national level at least, where 75% of governments since the Gandhi era have failed to win successive elections, democracy is alive and kicking.  For India looking ahead it will therefore be important to continue to preserve plurality at the national and local level, continue to root out corruption, and educate voters with regards to their rights and duties as citizens, while striving for improvements within to improve effectiveness and transparency, and thereby providing a governance model to the world which is an effective counter-narrative to the Chinese model that many emerging markets (and some developed ones) appear to be tempted by.

c. Execution Considerations. India’s size and diversity have given its democracy an unprecedented level of robustness, but it also makes it unwieldly in terms of effective participation and challenging in terms of building effective majority rule.  Its ethnic and linguistic diversity and vast discrepancies in wealth, education and literacy levels almost guarantee a broad range of views by the electorate on any given issue.  This makes consensus building challenging, requiring significant compromises to get to majorities in elections, while still resulting in strong opposition by minorities and their parties.   India’s federalism provides some reprieve by splitting the country into 36 regional states and union territories enjoying significant devolved powers. However, the ‘big ticket’ issues including telecommunications, highway and railways, mineral resources, currency and foreign exchange, international trade, and key regulations, to name a few, remain national issues legislated by parliament.  For these issues, there will never be a ‘one size fits’ all solution for the electorate, and these will require the centre to engage in fair and transparent processes to reach agreement with regional and opposition voices.


8. America-India-China Axis – Implement foreign policy for peaceful and constructive relations with US and China

a. Why does India Need It? The United States and China appear to be heading into a struggle for global economic and political domination.  While America appears to be retreating from some areas of leadership (e.g. global climate change, North Atlantic security, Iran), it is pushing back hard against China, taking trade as a starting point.  With China and India at odds over China’s evident security and trade related ambitions in initiatives such as the ‘String of Pearls’ strategy[13] and China’s Belt and Road Initiative fully encircling India with billions of dollars of Chinese investment and influence deployed in India’s neighbours, the United States is a natural geopolitical partner for development, security and economics.  However, given the current uncertainty of America’s long-term strategy, India may not feel it can fully rely on America especially if America sees it as helping the rise of another future competitor: either a strategy to make India the counter-weight to China or a strategy to provide limited support (but stop short of creating another giant) could be justified under President Trump’s “America First” campaign.   Accordingly, India will need to formulate a strategy toward the US that insures it against potential policy swings, while also forging a productive working relationship with China “on the ground”.

Strategic Encirclement


b. What Does Good Look Like? For an aspiring ‘middle power’ like India, bipolar superpower struggles create a unique set of risks. India’s historical approach of non-alignment during the Cold War allowed it to avoid significant entanglements, but also led it to miss out on economic and security cooperation that could have driven the country forward.  A winning strategy for India today may well require a long-term strategic partnership with the US, including both bilateral components where India’s rise does not threaten US interests (such as FDI or Central Asia security) alongside multi-lateral cooperation with other aligned partners in areas where joint interests might part in the future (e.g. Indo-Pacific defence or technology collaborations).  In addition, under such a strategy, India would also engage with China as a constructive partner at the regional and bilateral level, building infrastructure, energy and trade links that facilitate regional communication and commerce in a manner that even spreads benefits to all participants.

c. Execution Considerations. India will need to tread carefully in engaging with both the US and China. While given political realities, the only realistic goal can be a long-term strategic alliance with the US, India cannot afford to alienate an expansionist immediate neighbour with a significant head-start in terms of building out regional power.  Similarly, with long-term US intentions in South Asia unclear due to the mixed messages emanating from the White House[14], India will need to insure itself against possible American neglect or even antagonism, at least over the short-term.  As a (long-term) potential superpower itself, India has much to offer either country, with at least as many potential areas of cooperation as competition.  India’s leaders will need to prioritise partnership opportunities with both countries to become an important part of either’s strategy, while avoiding the creation of dependencies that would make it subservient in the bilateral relationship.


9. Open Finance – Restructure and liberalise the financial sector to mobilise and better allocate capital

a. Why does India Need It? With India’s public sector bank recording total non-performing assets reaching 16% of loans[15], it is evident that these banks have been left far behind by India’s private sector banks which have rapidly innovated and scaled and will also be left behind by technology-driven start-ups that have emerged to disrupt critical segments including payments, lending and financial product distribution.  India’s challenge is that, despite the public sector banks being visibly inefficient and uncompetitive, these banks still control 74% of the country’s deposit base[16], aided in large part by protection from the government and the Reserve Bank of India, which has thus far been reluctant to completely open the banking sector (as well as other financial products) to unbridled competition.

b. What Does Good Look Like? Good looks like a multi-institutional financial services sector with a smaller and defined role for the private sector alongside an innovative and well (not over-)-regulated private sector.  The core underlying issues which India needs to solve is the low level of savings (and dominance of savings in physical assets) relative to other markets and democratising the access to sophisticated financial products for India’s masses.  Despite the sharp increase in the percentage of people with bank accounts, which has increased from 35% on 2011 to 80% in 2017 (the same level as China),[17] participation in India is being held back disproportionately due to either the cost of financial products or the documentation required (see chart).  Both of these issues can be substantively addressed by fully utilising emerging financial technologies.


Gross domestic savings

c. Execution Considerations. Privatisation of the public sector banks cannot be done just for the sake of it and will not be a panacea to India’s financial sector’s issues.  Given the significant political capital that will be required to take on the entrenched unions, the immediate focus needs to be on restructuring and ‘professionalisation’ of the public sector banks and promoting competition by removing any regulatory advantages vis-à-vis the private sector, including issuing licenses to those with the necessary expertise and capital to participate.  At the same time, Indian regulators will also need to provide an accommodating regulatory environment for technology-enabled start-ups which are tackling core issues in payments, savings, lending, insurance and other areas to continue to innovate and build scale.


10. Open Energy – Rapidly develop renewables as an alternate to imported fossil fuels

a. Why Does India Need It? As the most populous country and the fastest growing major economy in the world, India is the third largest energy consumer globally.  Unfortunately, almost c.85% of this energy is sourced from fossil fuel, with coal alone accounting for c.50% of total energy consumption.  From a financial lens, this model of energy consumption is unsustainable as India’s increasing dependence on fossil fuels translates into significant oil imports[18], which in turn burdens the country’s trade deficit, and impacts its geo-political calculations.

b. What Does Good Look Like? Good looks like the transition to a national majority user of alternative energy with the industry and technology built to enable that consumption.  As part of its initial commitments to the Paris Climate Accord, the country has promised to reduce its carbon emission intensity and produce c.40% of its electricity from non-fossil fuels.  With only 15% of India’s current energy sourced from renewable energy, India will need to find a way to leverage its natural advantages (300 days of sunlight, 12 perennial rivers and a coastline of over 7,500kms) in order to develop renewable energy as a viable alternative source of energy.  India needs to target increasing its renewable energy contribution to at least 25% (equivalent to China today) over the next five years.

Renewable Energy Contribution

c. Execution Considerations. While India has already made significant progress in the area of renewable energy, there are a few challenges that are typically associated with this area.  The first is that historically, due to its reliance on natural elements, renewable energy does not help meet India’s peak daily electricity demands (which are usually after sunset).  Additionally, with the price of solar energy falling, utility companies are presently hesitant to commit to long-term power purchase agreements with solar energy providers.  Fortunately, the Indian government has identified these risks and has begun to address through a combination of policy and technology support (including introducing smart grids) and creating frameworks that will help renewable energy scale sustainably.


Conclusion: What it Takes to Make it Happen

Transforming India Executive ConsiderationsDeveloping the nation along the lines of the ten characteristics that would define India as a successful player on the world stage alongside America and China, requires strong visionary leadership to emerge from the next election and in successive elections over many decades.  Clearly, one can never count on flawless execution over what promises to be a multi-decade long transformation.  So, the institutionalisation of the programme of development will be essential.  The scale and scope of the transformation that India needs goes beyond that which can be achieved by a series of incremental reforms.  This requires vision, political clout, execution of bold reforms and the transfer of policy into national law, state-level laws and regulations and into the national bureaucracy. The table on the right lists a number of the key elements of such a transformative strategy might include.  As a benchmark, China at a similar point in its development and at a similar absolute size, successfully managed what has been a 20+ year transformation of its economy and society to emerge as the world’s second most powerful country.  Clearly, India’s journey is not China’s and any transformation India makes will need to be conducted within the boundaries of its diverse, noisy and sometimes messy but increasingly energetic and hopeful democracy, adding significant additional complexity to a process that China was able to manage top down with authoritarian control over the government, bureaucracy, economy and society.  Clearly, President Xi is not dealing with some of the aftermath of the top-down driven change, especially in corruption.  India’s next leaders will therefore need to account for election cycles, political opposition at the regional and national level, civil and property rights and population that jealously guards its liberties and is willing to protest to defend them, in courts or otherwise.  The challenges that Mr Modi’s BJP has faced in implementing reforms even with a strong mandate and political and economic tailwinds serves to illustrate the nature and scope of the challenges would-be leaders in India are likely to encounter in practise, no matter how clear the vision, aligned the bureaucracy or how targeted the execution plan may be.

History teaches that affecting transformational change rests often on timing.  For India’s next leader, regardless of their party or coalition, success will depend on successfully exploiting the moment, geopolitically, economically, technologically and socially, moving in manner appropriate to the mandate to execute and to build momentum for long-term change.  Executing a strategy that leverages all ten foresights listed above will require:

I. Exploiting the Moment: Aligning with Geopolitical Trends.  Align India with current US objectives and priorities to deepen the strategic relationship as a trusted partner.  This will require engaging with the US on near term priorities such as trade and IP as well as we as on longer term issues such as security, including the ‘Quad’ in the Indo-Pacific.

II. Exploiting the Moment: Shifting to the Digital Age. Digital technology is disrupting multiple industries across healthcare, education and financial services in the developed world.  India will need to be at the forefront of the shift to the digital age, using advanced communication and information technology to create mass digital platforms to delivering outcomes without physical infrastructure at scale.

III. Exploiting the Moment: Creating Popular Change. Technology and (in India) education and social media are redefining awareness and citizen’s demands and are increasing allowing populism to be a means for rallying people to support change.  India’s leaders will need to tap into this momentum, seeking to redirect populist attention on creating mass benefits to the population, particularly by driving mass inclusion in India, rather than using it to divide and conquer (something the public at some stage will remember from imperial rule and turn against).

IV. Exploiting the Moment: Shrinking the State. India’s government is still heavily involved in key sectors of the economy, crowding out the private sector in some areas and handicapping the efficiency of markets in others.  There are obvious areas for further privatisation driven by urgent priorities: India’s $1.5 trillion infrastructure need over the next decade requires private capital and India’s public sector banks require recapitalisation and ultimately privatisation to support a modern banking system.  But India will need to open other sectors to increased private participation, including education (even for the young), healthcare (even for the basics), and core services like sanitation, water supply and utilities, where India is lagging behind much of the world.

V. Exploiting the Moment: Accountability and Transparency. With the negative economic impacts of demonetization largely weathered and public support for anti-corruption still strong, India’s leaders will need to continue to push hard for India| Indian Economy | Narendra Modi | 2019 Indian General Elections | Indian Reforms | India’s Growth Model |India| Indian Economy | Narendra Modi | 2019 Indian General Elections | Indian Reforms | India’s Growth Model |accountability and transparency at all levels of government.  Technology can help in this regard, particularly with regards to government spending and benefits but further initiatives around bribery, corporate fraud and broader transparency in government decision making are clearly needed.

Implementing a programme like the one described above would be a challenge even for a nimble highly developed country today.  For a country like India the challenges are clearly even more significant, but the size of the prize is more than commensurate to the difficulty.  For decades, India has been seen either an also-ran, dismissed by its critics as a country too big, too diverse, too poor and too dysfunctional to ever get its game in shape, or seen as a high potential candidate that invariably fell short of its supporters’ expectations due to its inability to sustain reform, growth and change.  The past four years under Mr Modi have begun to reshape these perceptions.  While not without its critics (or examples of shortcomings for them to criticise), India under the BJP has demonstrated the ability to implement and weather reforms and criticisms which have positioned it for a potential future step change in growth.  Following on from this step change will require the winners of India’s next general election to put in place an economic growth model that not only builds on the successes of the past, but also harnesses current geo-political and geo-economic trends and events to plan for what rightfully should be India’s bright future.


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1. Please see last month’s Sign of the Times Leader which outlines the major reforms under various governments since 1991
2. Source: UN World Urbanisation Prospects
3. Source: GPC Analysis (see Section 3 below: “Open Education)
4. UN population projections indicate c.250m additions to India’s working age population in the next 15 years (i.e. c.17m new jobs required each year), with an additional estimated 3m jobs per year required for people transitioning out of agriculture or other low productivity employment. See Sign of the Times leader from February 2016: Realising India’s Demographic Dividend: The People Determine Success
5. Source: John Williamson, What Washington Means by Policy Reform, 1989
6. See the Sign of the Times Shape of the World to Come Series, published November 2016 – March 2017
7. See the February 2012 Sign of the Times: India Wide Open – Transforming India Now for 2040
8. Source: IMF World Economic Outlook Database (nominal GDP per capita for 2017 at market exchange rates)
9. Source: Credit Suisse Global Wealth Report 2017
10. Bruno Frey, Happiness, A Revolution in Economics(2008).
11. http://www.un.org/esa/desa/papers/2007/wp55_2007.pdf
12. Adam Michnick, The New Yorker, Dec 9, 1996
13. Referring to the series of Chinese owned or financed ports and potentially naval bases stretching from the South China Seas to the Mediterranean.
14. E.g. the recent announcement regarding stopping subsidies to emerging economies like India, complaints about Indian tariffs on US imports and the exports of American services jobs, particularly to call centres in India.
15. Source: Reserve Bank of India, as of 31st March 2018
16. Source: Information and Credit Rating Agency of India (ICRA)
17. Source: World Bank Findex Database
18. India is currently the world’s 3rd largest oil importer