Sustaining rapid growth is challenging

India's goal of Viksit 2047 requires both luck and clearly outlined plans and policies

In recent months, we have heard a great deal about India becoming a developed country by 2047 (Viksit 2047). It is certainly a very worthwhile objective, which connotes not just economic development but many other dimensions of overall societal development. Even within the narrow dimension of economic development, there is much debate and ambiguity about what constitutes a developed economy. As a first approximation, some have taken this to mean a “high income country”, as defined by contemporary World Bank categorisation of nations according to per capita income. From this perspective, it would mean nations with a minimum per capita income of about US$14,000 in today’s prices and exchange rates.

It is important to understand and appreciate that for the vast majority of today’s developing nations (by definition, low- and middle-income countries), the journey to the foothills of high-income nations is likely to be long and hard unless they are blessed with bountiful natural resources like oil or critical minerals. History tells us that. In the 74 years since 1950, leaving aside some oil-rich nations (mostly in West Asia), only a small number of countries have made the transition. They include a few well-off nations in Latin America (like Chile and Argentina) and in southern Europe (like Greece and Portugal) that were already close to being high income in 1950 and, of course, the development exemplars from East Asia, including South Korea, Taiwan, Singapore, and (on the threshold) Malaysia, and mighty China. It is this last category that has really demonstrated the capacity and tenacity for sustained, rapid economic development over two or three decades, which all other developing nations need to emulate.

The daunting challenges faced by poor countries in sustaining rapid economic development were brought home to me early in my career as a professional economist at the World Bank during the 1970s. My first economic “mission” was to Sudan in 1971. During my six weeks there, the paucity of capital, skills, technology, entrepreneurship and even peace and civil order became quickly apparent. The Blue and White Niles flowing through the country and meeting in the capital, Khartoum, encouraged an optimism about Sudan being a “nation with long-term growth potential”. Well, more than 50 years later, it seems that potential remains largely unrealised, with decades of long and bloody civil wars and the secession of South Sudan taking their heavy toll. For 2023, Sudan’s per capita income was estimated at a little over $500, making it one of the poorest of low-income countries. A few days ago, the UN warned that five million people “could slip into catastrophic food insecurity…in the coming few months.”

The following year, I was a part of a Bank mission to the Federal Republic of Yugoslavia. As we toured the prosperous provincial capitals of Belgrade, Zagreb, Ljubljana and Sarajevo, among others, we were struck by the developed-country quality of urban infrastructure and the fairly prosperous standard of living. Up until the late 1970s, the country was one of the fastest growing in Europe, despite the change of economic regime from socialist planning to “market socialism”, all under the watchful eye of the wartime national hero, Marshal Josip Broz Tito. After his death in 1980, the country fragmented as the constituent republics were caught up in bitter rivalries, which paved the way to bloody ethnic conflict and the wars of the 1990s. Provincial republics became nations: Serbia, Croatia, Slovenia, Montenegro, Bosnia, Macedonia and Kosovo. Today, all are in the high-income category, but there is no Yugoslavia. In the mid-1970s, I worked for a couple of years in Tanzania, a poor east African nation which was experimenting with a version of socialism and rural semi-collectivism (“ujamaa”). Fifty years later, after many ups and downs, its per capita income in 2023 was estimated at about $1,300, towards the low end of the lower-middle income category.

In comparison, India’s development journey since 1950 has been much better but not stellar. For three decades up to 1980, as the country experimented with socialism, planning and inward-looking development, economic growth was modest, averaging less than 4 per cent. After the major reforms of the early 1990s, growth accelerated markedly to average 6 per cent in the last 30 years, including a spurt of nearly 8 per cent between 2002-03 and 2010-11. But, as Chief Economic Adviser  V Anantha Nageswaran has recently emphasised, such growth was not sustained. Yet, this is what we need to do to attain the foothills of developed country status in the economic dimension by 2047.

Several studies, including one by the Reserve Bank last summer, has shown that the Indian economy has to grow by 8 per cent between 2022 and 2047 to cross the $14,000 cut-off level (in today’s prices) to join the band of high-income nations. If 8 per cent growth can be maintained over the next 10 years, our per capita income will equal Indonesia’s today, Brazil’s (today) after a second 10 years, and exceed $14,000 by 2047. But this is simply arithmetic. The actual trajectory of our economy will depend greatly on the global economic and geopolitical context, the nature of technological progress, the looming perils of climate change, water scarcity, energy availability, and a host of other external factors.

Above all, our long-term economic performance will depend on the quality and strength of our economic and social policies across all dimensions, including fiscal and financial management, foreign trade, education and health, employment, industry, agriculture, infrastructure, urbanisation, and overall governance, law and justice. History has shown that sustained rapid economic development is a hugely complex and arduous enterprise, with a great deal of luck and circumstance thrown in.

It is against this background that we await the government’s long-term plans and policies to achieve the worthy goal of a developed India by 2047.

The writer is honorary professor at ICRIER, former chief economic adviser to the Government of India, and author of An Economist at Home and Abroad , HarperCollins, 2021