Can India become the world’s third biggest economy?

Speaking from Red Fort Delhi on the occasion of India’s 75th Anniversaryº Independence Day on August 15 this year, Indian Prime Minister Narendra Modi predicted that in the next few years, his country would overtake Japan and Germany and emerge as the world’s third largest economy.

India’s growing confidence is reflected in its determination that by 2047 it will emerge as the world’s first largest economy, surpassing China and the US. While it may seem strange and an illusion, the reality on the ground may endorse what many Indians consider their country to be the number one economic power in the next 25 years. According to statistics, with an economic growth rate of 7%, US$3.469 trillion in GDP, US$537.52 billion in forex reserves, US$311.82 billion in exports, US$100 billion in FDI, US $8 billion in tourism revenue, $87 billion in remittances and $156.7 billion in IT export earnings, India is confident of sustaining its economic growth and overtaking Germany and Japan by 2028 to become the third largest economy in the world. However, to turn its vision into reality, India has to deal with its flaws, particularly the wave of communal violence, mainly against 250 million strong Muslim minorities.

Since the opening of the Indian economy, when Dr. Mahmohan Singh was India’s finance minister in the early 1990’s, like China, there has been a huge leap forward and in a span of 30 years, the Indian economy has managed to emerge as the 5th largest economy in the world.º greater economy.

Let’s see how India, which was impoverished, poor and underdeveloped, has managed to turn around and what issues can hinder its economic growth.

Like China, India followed a policy of self-reliance and instead of working towards an import-oriented economy, it focused on uplifting its economy through industrialization and native manufacturing. Furthermore, India was not in favor of relying on international financial institutions like the IMF, World Bank and Asian Development Bank or seeking help from foreign countries. Like China, when its economy became stable and strong, India decided to invite foreign investment and promote the culture of the corporate sector. The Indian diaspora was another source of pride and foreign exchange earnings, along with a steady edge in science and technology, that helped transform Bangalore akin to California’s Silicon Valley. The planning, hard work and foresight of its economists allowed India to work miracles in emerging as the fifth largest economy in the world.

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Notable Indian newspaper Deccan Harold in a report ‘India overtakes UK to become 5º World’s Largest Economy’ published on September 3, 2022, stated: “India has overtaken the UK to become the fifth largest economy in the world and is now behind only the US, China, Japan and Germany, according to projections of the IMF. A decade ago, India ranked 11thº among the major economies, while the UK was the fifth largest economy in the world. The assumption that India overtakes the UK is based on Bloomberg calculations using the IMF database and historical exchange rates in its terminal.”

Yet another Deccan Herald report titled ‘India at 75: Building a fortified future’ and published August 15, 2022 examines how India emerged as the world 5º greater economy in the following words: “Independent India’s first decades were about building state capacity and deploying our limited resources in physical and intellectual infrastructure. In the 1980s, with the demonstrated resistance of our democracy, we were ready to look outside economically. With liberalization in 1991, our markets opened up and we became a more self-reliant economy. Reforms such as lowering import tariffs and deregulated markets have led to high foreign investment and increased competition. As global competition found a fertile new market in our country, Indian industries met the challenge with enthusiasm. Over the last 30 years, we have proven ourselves to be competitive, resilient and innovative to compete with the best. The average annual GDP growth rate after the 1990s was around 6.25%, substantially higher than the average of 3.5% in previous decades. Today, India is the third largest economy in the world in terms of Purchasing Power Parity.”

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Based on the aforementioned facts, it is time to critically analyze why Pakistan lags behind India on all major economic indicators. Four decades ago, Pakistan was ahead of India in per capita income, economic growth rate and the value of its currency. The paradigm shift in the Indian economy over the past three decades has raised several issues that Pakistan must seriously address. Should successive Pakistani governments be blamed for the fragility of the economy, poor governance, erosion of the rule of law, extremism and militancy that have given the country a bad reputation? Or is it the lack of initiative, planning and perseverance at the non-governmental level that also contributed to the downturn in the economy? In fact, the culture of corruption and erosion of merit has also discouraged investment from foreign countries as well as the Pakistani diaspora – which is not the case in India.

Ironically, despite the fascist and extremist behavior of the Hindu nationalist parties led by the BJP, there is no impact on the Indian economy and the country is pursuing its vision of turning India into the world’s number one economy by 2047. Hindu extremism targeting minorities, particularly Muslims, and India’s blatant human rights violations in occupied Kashmir are the two flaws that could have serious negative implications.

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Two major repercussions can be gauged in Pakistan if India emerges as the world’s third largest economy. First, an increase in the Indian economy would put tremendous pressure on Pakistan because the world would feel comfortable dealing with New Delhi rather than Islamabad. Holding positions of responsibility in the global IT sector and financial institutions by professionals of Indian origin would isolate Pakistan in international business and IT-related fields. Second, with more resources at its disposal, India will be in a position to invest more in human development and infrastructure modernization, in addition to making large allocations to its defense forces.

The erosion of Pakistan’s economy means that it will not be able to find the resources to deal with the $30 billion in losses during the recent floods; pay US$130 billion in foreign debt; modernization of its infrastructure; increase human security; and improve people’s quality of life. If Indians are smart, insightful, competitive and visionary, then the Pakistani mindset should try to understand how India, like China, managed to make the big leap with its modern rail system, highways, underground metro in several cities and a vibrant corporate sector. . Unlike Pakistan, India abolished the zamindari system in the formative phase of its independence, alongside a constitution in place from 26 January 1950, which strengthened its democracy. Hence, Pakistan’s moment of truth.

Published in The Express Tribune, October 23rd2022

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