The arithmetic is clear. India’s income per person is about $2,700; the high-income threshold is roughly $14,000. The World Bank counts only 34 economies that have made this jump since 1990, most of them small or resource-rich. China, with 1.4 billion people, is on the edge of crossing this threshold in a single generation, so a country of our scale can do it. But we need around 7 per cent growth in income per person every year for a generation. Moreover, as the rich world restricts immigration, fewer of our talented young will find opportunities abroad, so we must build opportunities at home.
China reached this point through central planning, single-party continuity and command over capital, a path India cannot and should not follow. India is a federal democracy, with an independent judiciary, free elections, a free press and a Union that must work with the states. We must travel a different route.
We will not find this route through some comprehensive policy package or a new set of nation-building missions. India does not suffer from a shortage of policies or missions. It suffers from a shortage of dynamic institutions capable of making them durable, adaptive and accountable. Leaders, policies and missions are all necessary, but they are not sufficient. The real work is at the institutional level, in the rules of the game. Too much of our national debate misses the institutional forest for the policy trees. The task of the next 15 years is to build the institutional architecture through which key initiatives can outlast political cycles, attract talent, mobilise capital, and deliver at scale.
India knows how to build dynamic institutions. The Indian Space Research Organisation reached Mars for less than a Hollywood film’s budget, sustained by a culture that protects its technical autonomy. The Goods and Services Tax (GST) Council gives the Centre one third of the vote and the states two thirds and decides almost everything by consensus. The Insolvency and Bankruptcy Code (IBC) created a time-bound, creditor-led process where none existed before, even though it has needed adjustment. Add the Indian Institutes of Technology, UPI, the Reserve Bank of India and the Securities and Exchange Board of India, and the pattern is clear. These are islands of excellence, but they are not enough on their own.
A dynamic institution must pass three tests. It must be capable, lawful and accountable. A capable institution has continuous professional leadership, stable funding, technical autonomy and the ability to adapt, so it can deliver over long horizons. A lawful institution rests on durable law, a clear mandate and reviewable decisions, so citizens and investors can trust the rules. An accountable institution spreads power across multiple stakeholders, reports transparently and answers to elected representatives, the public and independent peers, so autonomy never hardens into capture. India needs a sufficient number of such institutions, across the state, the markets and society, working as an integrated architecture.
These tests are a report card, not a prescription. Any public institution can be asked three questions. Can it deliver? Is it lawful enough to be trusted? Is it accountable enough to endure? The payoff from getting this right is direct. When courts are slow, regulators unpredictable or contracts hard to enforce, investors demand a higher return for the risk, and the cost of capital rises across the economy. Credible institutions lower that risk premium, and over an investment programme measured in trillions of dollars, a few percentage points decide whether the transformation is financed or merely rationed.
Agreeing on the tests is the beginning, not the end. The pathway is familiar: Diagnose each institution against the three tests, sequence which to reform and which to build new, build consensus across parties and between the Union and the states, and legislate in iterative steps. This is how we built the GST and the IBC. Above all, we must move quickly, because the windows will close whether or not we are ready, and institutions take years to mature. The arithmetic is clear, and it is unforgiving of delay. Build enough capable, lawful and accountable institutions now, and India can turn its three windows of opportunity into a high-income transformation, a Viksit Bharat that is prosperous, just and green.
The author is president of the Everstone group and visiting professor of practice at the London School of Economics. He is a former Union minister of state for finance and civil aviation, and former member of the Lok Sabha, where he chaired the Standing Committee on Finance
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