It seems India will overtake Germany to emerge as the fourth largest economy globally by 2022
There is speculation that India will overtake Germany to emerge as the fourth largest economy globally by 2022. Having surpassed Great Britain in December 2016, now the next target would be to move beyond Germany in the pecking order.
If the International Monetary Fund (IMF) projection is anything to go by, India has the wherewithal to surpass Germany after having firmly knocked out its former colonial master United Kingdom from the elite league of top five. Sadly India remains content with the tag of being the fastest growing economy in the world, something that the nation and its 1.3 billion people achieve without any real effort. It is incumbent on the government to step up to the plate and create a benign environment and eco system for structural reforms which can provide the necessary tipping point to go beyond 10 per cent GDP growth. As luck would have it, much maligned agriculture provides the necessary impetus to Indian economic growth whenever it crosses 4 per cent and there is empirical evidence to support this. We cannot wait for multilateral agencies to commend us, we have make our own path, which in any case is littered with imponderables given that Luddites across the political spectrum abound. For PM Modi, the time to take transformative decisions to go beyond the pale of administrative reform is here and now. yes, he has veered left in his quest to bridge the divide between Bharat and India, but there is so much more to do. Happiness is a state of sub conscious, it has to be taken to the next level of sincere competence.
IMF has rightly pointed to the likely possibility of India overtaking Germany even though there are several limiting factors for the Indian economy that could hinder its crossing the $3.5 trillion mark from the present $2.3 trillion figure among the top four economies after US, China and Japan in the next six years.
Ensuring political stability with a strong government at centre and states that continue with economic restructuring and reforms may be a pre-requisite to achieve this exalted status, notwithstanding the fact that India continues to be the fastest growing economy at 7–8 per cent annually.
While the current regime headed by Narendra Modi is scheduled to end its term in May 2019, an equally committed government taking the reins after the next Lok Sabha elections may, in fact, determine whether India will continue with its ascent in the global economic order. Given the kind of splintered and de-motivated opposition, forging an alliance to take on Modi looks far fetched as of now.
Apart from political stability, India will have to clock GDP growth of 9.9 per cent in nominal terms annually till 2022 to surpass Germany. This again is achievable given that it translates to about 8 per cent GDP growth annually. Secondly, the Indian government will have to take measures to unleash the vast potential that will come with freeing the labour markets and enhancing industrial and farm productivity. This will have to figure high on the government’s agenda.
As per data compiled by the International Labour Organization (ILO), India’s output per person is dismally low and slumped by more than half to 4.8 per cent in 2016 as against 10 per cent in 2010. Interestingly enough, the Indian worker’s productivity has been pegged at $3,962 for 2017 as against a huge $83,385 in Germany. Countries like Indonesia, China and South Korea are also expected to fare better than India on the labour productivity matrix.
The Goods and Services Tax (GST) is expected to give positive dividends in the long term. However, deft management of short term disruption is what will help India’s rise internationally. Reforms in banking, financial institutions and further opening up of markets across asset classes will hasten India’s journey. Providing productive employment in both industry as well as agriculture during next the six years can make a difference to the Indian economy while making the economy more ‘inclusive and broad based’.
Skeptics have always doubted the possibility of India taking prime position globally. It was able to surpass Britain owing to a multiplicity of factors like Brexit-related problems and sustained devaluation of the pound. What also worked in India’s favour was the sustained economic growth momentum over the last 25 years.
Even though the think tank, Centre for Economic Research and Business had forecast that India would become the fifth largest economy by 2020, this rare feat has been achieved much earlier, triggering forecasts for 2050. Global media reports have even looked at the possibility of India becoming the second largest economy by 2050 after China, even if it posts a conservative 4 per cent annual GDP growth and the US clocks 1.5 per cent. In case India continues with its 7–8 per cent growth streak on a sustained basis, it may emerge as the second largest economy much earlier, say by 2030. That will be something to cheer for when it happens.