February 1, 2016
It’s a great time to be Indian
by Shrey Srivastaya
What is India? India is more than just a country. It’s an amalgamation of hundreds, even thousands, of different cultures and faiths, living together harmoniously under one sky. It’s a country that’s seen its growth halted by horrific oppression (read: Amritsar massacre) due to Western colonialism. It’s the country from which came the world’s first university and the stepping stones to the first ever moon landing. It’s a country that’s justly going to surpass their former ruler, Great Britain, in global power and influence (some argue that it already has). Despite being plagued by poverty and riddled by structural corruption, India has seen substantial levels of economic growth in recent years, along with strengthened relations with many countries both developing and developed, from Afghanistan to the USA. In future, under the watchful gaze of one of the greatest leaders that India has ever seen, Narendra Modi, India is only going to go from strength to strength. It’s already surpassed its rival, China, in terms of economic growth, and will leave it in its wake in the next decade. So, what is India? India is the next global superpower.
A thriving, young workforce is the bedrock of the Indian economy. In 2020, the average age in India will be 29. Compare this to China, where the one child policy has ensured that the average age will be 37, and to Japan, where the average age will be a massive 48. The advantage that comes with having such a youthful population is that the dependency ratio (simply, the ratio of those not working to those working), will be at 0.4 by 2030. This means that the pressure on the productive Indian population will be substantially low, and also means that a very large proportion of the country will be working. The fact that so many people will be working leads to an increase in gross domestic output, and consequently, gross domestic product (GDP), which, in turn, leads to staggering levels of economic growth. These increased levels of economic growth result in a higher average income for the Indian worker, which leads to more taxable income for the Indian government. The increase in government revenue will encourage them to spend more on public services, the most important of which is education, leading to more people having the skill levels to work in the tertiary and quaternary sector rather than the primary sector, thus technologically advancing the country. We can already see this happening in Bangalore, which has been frequently lauded as the “Silicon Valley” of India, generating over $17 billion in revenue a year.
Huge levels of foreign direct investment are perhaps also one of the biggest feathers in the Indian tail. In the first half of 2015, India garnered $31 billion of foreign direct investment, with China only attracting $28 billion and the US $27 billion. Since the economic liberalisation that took place in 1991, foreign inflows of capital into the South Asian country have been skyrocketing, opening up far more job opportunities for a young, newly educated workforce to take. Of course, this will reduce unemployment levels, giving more people the disposable income to invest in Indian goods and services, thus increasing the revenue levels of the companies manufacturing and selling these goods and services, giving them more money to open up more branches and employ more people, who will then spend, in a virtuous cycle. The positive multiplier effect engineered by foreign capital inflows into the country results in a new degree of economic prosperity for the country as a whole, and most importantly, an increase in the quality of work in the country (unemployment is a non-issue, with unemployment rates at 3.6% as of 2014, according to the World Bank). An intrinsic problem with India, along with much of the developing world, is that much of the employment generated there is in the informal sector, which is frequently not taxed. This increase in foreign direct investment into the formal sector of the economy will hopefully result in the growth of this sector, thus resulting in an increase in taxable income and revenue for Modi’s government.
The geographic position of India is also a huge strategic advantage to the country in its quest to become an economic force. In fact, it is the control of India that gave the British Empire such global dominance (unfairly, I might add). It is for this reason that, in 1 AD, India constituted over 30% of global GDP. Nowadays, without any Western anchors to their progress, their geographical position will ensure them a comparative advantage over other countries with regards to trade. India’s geographical advantage is perhaps put best by George Curzon, a British statesman, who proclaimed that “On the West, India must exercise a predominant influence over the destinies of Persia and Afghanistan; on the north, it can veto any rival in Tibet; on the north-east . . . it can exert great pressure upon China, and it is one of the guardians of the autonomous existence of Siam. Possession of India gave the British Empire its global reach.” The favourable relations which India has kept with many other countries will also work in their favour, looking forward. The biggest global power in the world, the United States of America, views India very favourably, with both Narendra Modi and Barack Obama having visited the USA and India respectively in 2015. The USA, along with other countries, has India’s core interests at mind, and will definitely not be a roadblock to any future plans. India also has good relations with many other powers, including the United Kingdom, Spain, France, and even Saudi Arabia. This will serve as a massive boon to Modi’s country in future; with India’s strengthened relationships with China, their biggest direct opposition is Pakistan.
The biggest challenge for India now is to tackle the systemic corruption present within the country, and to solve the issue of poverty within the South Asian nation; large steps are already being taken by Modi’s government to resolve this. Under the stewardship of who will come to be known as one of the greatest Prime Ministers in Indian history, India is proceeding into one of its brightest eras yet.