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In addition to the Korean economic miracle, there is an Indian one in the world. For several decades in a row, the country has shown economic growth above the world average. How it was possible to achieve this – in the material of Trends
Growth in India’s economy will slow in 2022, but it remains the fastest growing in the world, according to a report published in mid-May by the UN Department of Economic and Social Affairs. According to forecasts, in 2022 the economy of this country will grow by 6,4%. For comparison, the EU economy this year will increase by 2,7%, the US – 2,6%, China – by 4,5%.
“This is due to a fairly competent economic policy, with a huge population, an increase in educational qualifications, and the development of industry,” says Sergey Lunev, Doctor of Historical Sciences, Professor at MGIMO.
Stable growth and great opportunities
The first prime minister of independent India, Jawaharlal Nehru, was a supporter of a socialist-style society. The first two five-year plans for economic development (1951-1961) planned to transfer all strategic sectors of the economy to the public sector. His course was continued by Indira Gandhi (Prime Minister in 1966-1977 and 1980-1984), in which the policy of the state was predominantly socialist. There were many restrictions on doing business. Although there have been successes. Thus, the state contributed to the modernization of agriculture, as a result of which, since 1978, India stopped importing food and achieved full food self-sufficiency.
According to Boris Volkhonsky, Associate Professor of the Department of Indian Philology at the Institute of Asian and African Countries, Moscow State University named after M.V. Lomonosov, after the change of power (the assassination of Indira Gandhi in 1984), democratic reforms began in India. The government decided to put the economy on the path of liberalization, market relations became the main principle of economic development. Small and medium-sized businesses began to gain momentum, barriers were removed.
“The accumulated effect of such a long gathering of forces has yielded results. The accumulation of potential proceeded in a quiet, dim, not very noticeable way at first glance. But it gave impetus to the development of the economy,” he explained.
Between 2000 and 2017, the Indian economy grew 3,3 times. The average annual growth rate of India’s real GDP was 7,1%. During this period, it also ensured a stable growth of real GDP indicators. The country has declared itself as one of the world market leaders in the field of outsourcing of production, information and financial services.
India has become one of the world leaders in the field of pharmaceuticals. It has become one of the key modern branches of the Indian economy and a kind of “niche” of the country in the world market. Leadership in this industry has been purposefully stimulated by companies and the government.
“If at the beginning of the 14st century the share of exports of engineering and pharmaceutical goods was 2012% in the structure of Indian merchandise exports, then by 42 it was already XNUMX%,” says Dmitry Timokhin, Ph.D. in Economics, in a study.
India retains its leadership in agriculture as well. The state ranks second in the world in terms of production of this product. Its share in the country’s GDP reaches 17-18%. The main crops are rice, wheat, sugarcane, sunflower. India also ranks first in the world in terms of livestock.
Sergey Lunev outlined several key points for the development of the Indian economy today:
- Some high-tech areas. First of all, it is IT-technologies. India has been the world’s second largest exporter of software for 15 years. It exports technology worth $150 billion annually.
- Development of all segments of the industry. New enterprises that appear in the country every year. They are completely modernized and meet all modern technologies.
- Pharmaceuticals. The peculiarity of the local drug industry is that it produces generics, they save hundreds of thousands of lives. People who can’t buy Western original drugs buy Indian counterparts. Many of them are not inferior in quality.
- Biotechnology. In particular, cellular and genetic engineering. They are actively used in the world, including by the advanced countries of the West.
- Mechanical engineering. Now it is carried out mainly on a franchise basis. Under licenses primarily from Japanese firms. In many ways, there is a backlog in technology, but growth points are outlined.
In order to increase industrial production and involve remote territories in the process of sustainable development, India initiated the creation of five industrial corridors. The largest of these will be the Delhi-Mumbai corridor, with investments in infrastructure development of about $90 billion. Industrial corridors will also be created: Amristar-Kolkata, Chennai-Bangalore, Vizag-Chennai and the Bangalore-Mumbai economic corridor.
Export and import
Since the beginning of the 9st century, India’s exports have grown 70 times. More than 17% of it falls on industrial products. This is the petrochemical industry, diamond, jewelry, car industry. The key markets for Indian products are the EU and the US, 16% and 4% respectively. China accounts for about XNUMX% of all exports.
In the structure of imports, more than 50% are industrial products and 30% are mineral resources, including fuel. This positions India as an energy importing country. Almost 15% of imports come from China and 10% from EU countries, imports from other SCO countries are small.
“It turns out a funny thing – exports and imports coincide in many respects. India imports raw materials and exports processed products. For example, it imports rough diamonds and exports diamonds,” Sergey Lunev said.
Today, India can export almost everything, but the state cannot do without the import of energy resources (primarily hydrocarbons). The country is growing production, but there is not enough energy, Boris Volkhonsky notes. For example, in many villages there is still no electricity. Therefore, many projects are being prepared for alternative methods of energy production. In addition, now in India they are focusing on the development of nuclear energy.
Defeating poverty and overpopulation is the next challenge
India is the second most populous country in the world. Its feature is a large number of young people. The proportion of persons under 25 years of age is 45%. One of the main strategic tasks of the state at the present stage is the elimination of poverty and the fight against hunger. Between 2015 and 2017, about 15% of the population were hungry, 43% were working poor, and another 21% lived in extreme poverty.
“Given that almost 44% of the country’s labor resources are employed in agriculture, where about 16% of GDP is produced, it is important to increase the efficiency of labor in agriculture,” says Tatyana Akhmadulina, Associate Professor of the Department of World and National Economy of the All-Russian Academy of Foreign Trade of the Ministry of Economic Development, in a study.
In India, the so-called “traditional poverty” associated with caste heritage is also strong. Even with effective reforms, it is difficult to deal with age-old foundations. The modern government creates many programs for the former untouchables. They make up over 20% of the population. This is a caste that lived in the slums for centuries and did the dirtiest work. Now places are reserved for them in prestigious schools and higher educational institutions. According to the constitution, any discrimination is prohibited. For a question about caste when hiring, the employer will even have to pay a fine.
Another challenge of modern India is overpopulation. The country ranks second in the world (after China) in terms of the number of inhabitants. However, it occupies only the seventh place in terms of area. Because of this, there is a shortage of food and unemployment in the state. There are many more people willing to work the land than the land itself. According to Boris Volkhonsky, in recent years a program has appeared in the state for the export of peasants to African countries. Where there is a lot of land, but not enough workers. For the local population, this is a way to earn money and see the world.