How Soon Can India Become a Developed Nation?

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When India overtook China as the fastest growing major economy in the world earlier this year, the significance of the development did not go unnoticed. With this breakthrough, India had stormed the global scene to claim its rightful place among the world’s top economies. Its GDP had grown to 7.6% from 7.2% a year ago, consolidating its position as one of the few bright spots in a flailing global economy. The development gave cause for hope to the Narendra Modi government, which had introduced during the preceding two years several concrete measures to boost the economic growth of the country. Rating agencies such as Crisil have predicted a further growth in India’s GDP to 7.9% in 2016-17. The prediction is backed by good rainfall during the monsoon and an upward yield in agricultural production this year. Crisil has noted another positive development – sustainability of nominal GDP growth. Domestic credit growth has averaged 9.8% in the last two years, almost in lockstep with 10.2% nominal GDP growth.

Growth of the Economy

India had, in fact, been found firmly latched onto the graph of growth for quite some time, as a nation with a young workforce, a large English-speaking population, a stable government at the centre, rising forex reserves and related indicators conducive to the upsurge in capital investments. The investment growth had, however, become sluggish on account of daunting impediments such as the absence of bureaucratic reforms or a major breakthrough in the infrastructure development. The situation had been compounded by corruption, inflationary trends of the market, etc. When the new government at the centre blazed its way through in 2014 and dedicated itself to an inclusive growth backed by investment-friendly policies and schemes, the corporate houses at home as also their foreign competitors became witnesses to a new era of development – a period marked by structural reforms, the slashing of the mire of legislative bottlenecks and rejuvenation of a comatic bureaucracy that had ridden piggyback in the previous years on successive lacklustre governments that lacked the will to spur economic growth.

Observers of global financial and economic trends observed that India’s macroeconomic prospects had improved. This became possible on account of the relaxation of rules governing foreign investment in more than a dozen sectors including insurance, pensions and railways; cutting of red tape and pushing through of legislative proposals in a bid to simplify bankruptcy procedures and strengthen intellectual property rights. The Union government had also fast-tracked infrastructure development. Road-building as well as railway and highways expansion have also been accelerated. Notwithstanding the global buzz around India on account of the impressive performance of its economy, the nation finds it difficult to further the pace of its economic growth. This is owing to the inhibiting factors in an unsupportive global environment and stagnant investment in some sections of the private sector.

Race to the Top

According to many analysts, India stands poised to take over Japan’s place as the third largest economy in the world by 2020 from its current standing of tenth. Some analysts believe that India may grow even faster than that and beat the US to the second place. They cite India’s young and faster-growing population as the key factors that will contribute to this renewed rate of its economic growth.