Prosenjit Datta's book highlights facts about India's development goals

Prosenjit Datta's simply argued and logically constructed book encourages readers to look beyond political posturing for the facts on India's developmental goals

Will India get rich before it turns 100? A reality check

Author: Prosenjit Datta

Publisher: Aleph

Pages: 138

Price: Rs 499

  Economic treatises, says Prosenjit Datta, a distinguished Indian editor and business journalist, can be frustratingly obtuse and reader unfriendly. This attractively written book is anything but. It packs a punch despite being deceptively slim, is carefully but simply argued and logically constructed to educate the reader to look beyond political posturing for the facts.

 

One such is the national goal of Viksit Bharat by 2047 when independent India turns 100, the key proposition that Mr Datta examines in this book. As he points out, long-term predictions tend to go wrong. It is difficult enough to predict even short-term outcomes. Consider that in 2018 India expected to be a $5 trillion economy by 2022. The Covid-19 pandemic intervened, and we now look to 2026 (according to the economist Arvind Panagariya), 2027-2028 (the prime minister’s economic advisors) or 2029 — the last year of Prime Minister Narendra Modi’s third term.

 

 

Growth is slowing, globally and in India, exports have slowed, any disruption could harden gas and oil prices, increasing the trade deficit and rupee depreciation, inflation and interest rates remain high, punishing new investment. Undeterred, since India’s Golden Age (Amrit Kaal) has started, a new target for a $30 trillion economy by 2047 is on the table.

 

Is becoming rich the same as being developed? Global comparisons of being rich use per capita income rather than the size of gross domestic product (GDP). Even this is a fuzzy metric since it does not assure reasonable equality in income distribution. In 2024, the World Bank classified 85 countries as high income (a proxy for being rich at least on average), each with a per capita current income above $14,005. China is at the upper middle-income level but close to high income. India at $2,485 (2023) is extremely far from getting there. Even if China grows at 4 per cent a year till 2047 and India at 8 per cent, we will remain the smaller economy. But, as Mr Datta asks, can we become developed, nevertheless?

 

The most detailed assessment of comprehensive development by country is the United Nations Development Programme’s Human Development Index, which assesses economies by the capacities of their people and not only by economic metrics. India ranks at 134 (in 2022) out of 193 countries and is listed in the medium development category, not too dissimilar from our rank of 148 in the World Bank per capita income rankings. Development does become easier as we grow richer with two exceptions. Environmentally disruptive growth (excessive carbon emissions, degradation of land, water, and forest natural assets) and politically divisive or unstable states, breed low institutional capacity with social tensions. Both outcomes enfeeble the economy.

 

Achieving high per capita income levels by 2047, the author notes, requires an average nominal annual growth rate in current dollars of 8.92 per cent if the rupee depreciation is limited to 1 per cent per year; or 11.42 per cent if the annual rupee depreciation is 2.5 per cent. How do these growth expectations compare with past performance? To be sure, China grew at 12 per cent per year over 25 years till 2023 while India grew at 8.92 per cent per year in current US dollar terms. Repeating this feat would require maintaining a low inflation differential between the rupee and the US dollar of one percentage point. This rules out using inflation for growth stimulus, requires closer management to avoid supply price shocks, and tighter control over the fiscal deficit than evidenced since the global financial meltdown in 2008.

 

Doing more of the same cannot be the answer. Nor is it advisable to adopt the China template of ever more statism and centralised control, with woeful recent results on growth, lower now than in India. Presciently, the author highlights four areas where deep reform is necessary.

 

First, reverse the slide in our statistical capacity, practices, and outputs. Not doing so is inexplicable when our first Census was done in 1872 — one and a half centuries ago. Consistently measured, accurate, timely, disaggregated economic data is essential for better management of population trends, jobs, degenderised labour participation, unemployment, poverty levels, business investment

 

and inflation. Second, it is not enough to keep tax rates high and spend more through the budget. The efficiency of public spending must be forensically audited, published, and debated periodically — in health, education, large infrastructure investments, and welfare payments, to reduce double-dipping between Union and state programmes.

 

Third, ensuring energy security whilst reducing the emissions intensity of GDP remains a goal, sans a cost-effective implementation plan, beyond expanding renewable electricity.

 

Finally, we must adapt and integrate Artificial Intelligence into public systems and become a global provider of niche AI services, even as traditional IT backend jobs are downsized.

 

Avoiding self-goals — such as demonetisation, statism, centralisation, and exclusionary politics — while enhancing trade competitiveness, open borders, integration into global supply chains and incentivising productive, job-oriented, private investment over public investment. All of this is a reasonable playbook for getting rich and becoming developed.

 

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(Prosenjit Datta is a Business Standard columnist)

 

The reviewer is consultant, economic governance & energy regulation