India has yet again ascertained its growth orientation in the first quarter of FY24 clocking an impressive 7.8 per cent. Good performance by agriculture, financial sector and services fueled this. It has sealed the global interest in India as a stable investment destination. This growth is similar to China’s of 2007. India can emulate and at the same time avoid mistakes in this new growth phase by observing its peers.
On contrary, the Chinese economy is going through a period of degrowth. The real estate sector is facing bankruptcy, FDIs are slowing, exports have declined, youth unemployment has increased and added to all this, is the decreasing fertility rates. A combination of all the factors that were once advantageous to China’s growth has turned against it. China’s mass manufacturing at extremely low prices made it the factory of the world. Though the policies were stringent and most contracts were one-sided, companies went ahead for the price advantage. When covid struck and the global supply chain came to a halt, the realisation for a back up hit strong. Cases of cyber espionage through electronic components from China created a sense of panic among manufacturers to shift shop soon. India offered a reliable and trustworthy alternative. As one by one left shore, China was grappling to come out of the pandemic restriction. And the economic growth that went downwards, is yet to rise.
Continued investment in infrastructure and research
India’s current economic situation is similar to China’s in 2007. While India rides the growth wave, some lessons from China’s experience will be of great value. Continuous investment in infrastructure, research and development was the basis for massive transformation in China. This powered both manufacturing and services industry. While India has recently announced intensive capital layouts, similar approach to foster research will be needed for a transition to a knowledge-based economy. This will provide a competitive advantage and at the same time develop logistics, connectivity and ultimately the ease of doing business to attract more foreign investments.
Export diversification and stability
China’s economy was entirely based on its exports. A halt due to covid toppled everything over. While India is moving in the same direction, it stills enjoys the burgeoning demand of domestic consumption. It has been just few years since this demand picked up due to growth of disposable income among youth and increasing aspirations of the middle class. In current times of global uncertainty, the local market helped the country sustain growth momentum. This trend is expected to continue but the government should straddle carefully balancing both exports and local demand.
Demographic dividend
As the nation with most people in the workforce and awaiting to join soon, India’s manpower is a boon. But extensive skilling will be necessary to employ talent and to use their services for nation’s growth. Women’s participation is quite low. Steps must be taken to encourage them to take part as they form a substantial half of the population. While the demographic dividends are reaped, the government must also think of the soon to hit ageing population. A different set of capital and social infrastructure would be needed to address their needs.
Green transition
To meet India’s aspirations, huge amount of energy will be required. In a world with growing concern over sustainability, this has to be achieved through green initiatives. India already has a good mix of renewables in its energy basket and is looking at ways to further it. Planned urbanisation must be followed which will result in better physical and mental well-being.
India stands at the initial steps of its great growth agenda. Considering the experiences of other economies, will help India to avoid pit falls and stand tall balancing growth and development.
