India does appear to be a leading economic power, and this is something that has been recognised by the world
As we celebrate our 78th Independence Day, there is a lot to cheer and be optimistic about on the economic front. And this is not just because we are talking of reaching a size of $5 trillion or $10 trillion or even a developed country in 2047. One could say that for any country which will achieve nominal targets at some point of time. But what is more important is the qualitative changes or transformation that has taken place in the Indian economy over the last seven decades or so. The big push came post 1991 but a silent change took place even before reforms came in, albeit at a gradual pace as socialist ideology came in the way.
Let us see the main areas of change which probably the millennials and Gen-Z will not be familiar with, as the last 30 years have been very different from the preceding period. First, on the agricultural front India is a nation of surpluses on almost all counts and with proactive policy can actually be a supplier of foodgrains to the rest of the world. The pre-reforms period was characterised by shortages and rationing of essential commodities which is now a thing of the past. Those who made a living in the pre-reforms era were used to standing in lines to get even humble products like sooji and maida which were available only in ration shops. India is one of the largest producers of rice, wheat, pulses, groundnut, sugar, milk and horticulture. In the last three decades there has never been an instance of going back to rationing of food products and any fall in supply is met through imports quite seamlessly.
Second, the scale of industry has widened and become all encompassing. There is no manufactured good which is not made available in India and hence the overall structure is at par with any developed country. Liberalisation coupled with the opening of foreign investment and permission to single brand products to enter post 1991 has brought to the doorstep all manufactured products. In the pre-reforms era, the fortunate ones who travelled overseas or had relatives and friends visiting would bring along shaving foam and shaving blades along with perfumes. Today all these products are available at the local store.
Third, the almost five-fold increase in road length over the last five decades bears testimony to the progress made on the infra front. This can be juxtaposed with the almost 10-fold increase in air passengers making access available to more people. This has been a major achievement with some of the national highways being comparable to those in the west. Similarly the privatisation of airports and entry of competition has changed the landscape of air travel. Here again the new airports using advanced technology, the airports are something to be proud of.
Fourth, the tremendous stride made in export of services has been at an unprecedented scale. Earlier, any talk of exports concerned goods and less of services. The IT sector has grown in stature and has contributed not just to the nation building cause (Jan Dhan and Aadhaar for example) but also become a major earner of foreign exchange for the country which supports the current account balance as well as balance of payments.
Fifth, the financial system is best in class. The RBI can be credited for not just ushering in competition in the banking system by opening the doors to private players and technology but also ensuring there has been systematic growth without compromising on prudence. History shows that even while the global financial systems went through traumatic times during the Asian crisis or the Lehman debacle, the Indian system stood out in terms of resilience. On the innovation side, UPI stands out as this is something which several countries now would like to adopt for ease in payments.
In parallel, the capital market has not just developed to become a global system, but also has heralded change and transformation in terms of being far ahead in terms of getting in online trading as well as dematerialisation into the system. Here, the regulator SEBI needs to be credited as it has taken a lead to bring about harmonious growth in all segments of the market. NSE as we know is one of the pioneers and leaders in the world when it comes to derivative trading.
Sixth, the entire retail space has changed and while the local kirana continues to do business, the springing up of retail malls and online delivery has offered options to all consumers irrespective of income class. This has been one leveler in society that is creditable.
Seventh, while it can always be argued that countries do think that their economies are doing very well, the ultimate vindication is seen by how investors perceive the story. Here India has been one of the biggest hits with both FDI and FPI flowing in large numbers. The proactive policies pursued by the government along with the large potential seen in the market has drawn FDI in large numbers over the years. In the last 5 years over $380 bn of FDI has come into the country across various sectors.
Further, the FPIs have found Indian markets very attractive and in a way have also worked in tandem to the development of the equity segment. More recently the inclusion of Indian government bonds in the Morgan Stanley Bond index which will be followed by Bloomberg next year does reflect the internationalization of Indian markets. The fact that the RBI and the government have taken baby steps to internationalize the rupee is also significant as the world seeks to move away from an extreme dollarised economy.
Looked at from this perspective, India does appear to be a leading economic power, and this is something that has been recognised by the world. The entire superstructure has been created rather rapidly in a thorough manner over the years. The government has simultaneously worked at the bottom of the pyramid through targeting of schemes. Subsidies have been rationalised and income transfers and employment cards have been streamlined through the use of technology. Here the digital revolution has helped in the transformation. Hence the model which has been followed has been truly inclusive as the equilibrium has been maintained given the differences in opportunities and income at the micro level.
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