Trace the Economic History of India, Read an Excerpt from “The Struggle And The Promise”

India has the potential to lead the world thanks to what it has now – a diverse culture with something for everyone, a young population thirsty for education and achievement, and a strong and diverse private sector. Much must change to achieve India’s potential – targeting rapid economic growth as its collective goal; investing in innovation, design, education and research; building independent institutions step by step; and harnessing its diverse culture.
Here is an excerpt from Naushad Forbes’ The Struggle And The Promise to help you map out the historical context of Indian economy, and understand its relations with our contemporary economic struggles.

Five hundred years ago, the world was a pretty equal place. Every country was poor, and the richest country had around twice the per capita GDP of the poorest. By 1800, the richest country was around five times as rich as the poorest. By 2020, the richest countries (Switzerland, Norway) were three hundred times richer than the poorest (Niger, Malawi). When some of our present-day nationalists talk of reclaiming some bygone golden age of Indian history, they are mistaken. There was glory if you were the ruler, or near him (almost always ‘him’, and not ‘her’). For an ordinary person, in every country, life was ‘solitary, poor, nasty, brutish, and short’. There is only one reason India accounted for a much larger share of world GDP five hundred years ago than now—every country was poor, and we had many more poor people.

A few countries started to grow consistently over long periods of time, first Britain in the 1700s, then much of continental Europe, the US and Canada (1820 onwards), Japan (1870 onwards), Australia, New Zealand, a few countries in Latin America and South Africa (1900 onwards), South Korea, Taiwan, Hong Kong and Singapore (1960 onwards), and China (1980 onwards). The countries that grew in the 1700s and 1800s grew at low rates (1.5 per cent per capita was typical), but over long periods—a century or more. After becoming the world’s richest country in the mid-eighteenth century, Britain held that position for a century and a half. The US overtook Britain in 1913 by growing its per capita GDP at 1.5 per cent per year for a hundred years. The countries that have caught up with the West since 1950 (Japan, South Korea, Taiwan, Hong Kong, Singapore) grew much faster, at 8 per cent or more per year, bridging the gap with the rich world in one generation. Coming late to development provides the potential for more rapid catch-up, but only a few countries actually do so.

It is only since 1991 that India grew at rates that allowed for some convergence with the richer world. We can congratulate ourselves on overtaking France and the UK in 2019, to become the world’s fifth- largest economy at $2.9 trillion. But we should remind ourselves that this is largely because we have 1.4 billion people; per person, we are still among the poorest one-third of countries in the world.

Catching-up comes from decades of sustained growth:

In 1960, South Korea and India had much the same per capita GDP. In 1980, China and India had much the same per capita GDP. South Korea ($32,000) is now fifteen times richer than we are and China ($10,300) is five times richer. It’s all a matter of growth rates. Between 1960 and 1990, South Korea grew at 9 per cent each year, to India’s 4 per cent. Between 1980 and 2019 China grew 9 per cent each year, to our 6 per cent. In the three years before the Covid-19 pandemic, India and China both grew at around 6 per cent.

Our national priority, then, must be to catch up, through long-run economic growth. Table 2.1 tells us the rates of economic growth that we need to catch up with where China, Malaysia and South Korea are today.

We must grow 9 per cent anually for four years to achieve the $5 trillion by 2024 goal set by the Modi government. Thanks to the pandemic and associated lockdowns, March 2022 will see us where we were in absolute terms in March 2020. These two lost years are something we can ill-afford, so our $5 trillion goal must now be set back to 2026. With a $5 trillion economy, we will be as rich in 2026 as Indonesia is today ($4,000). But to be as rich as China is today, we must sustain 9 per cent growth per year for twenty years. That, surely, must be our minimum aspiration—to be as rich in twenty years as China is today.

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