Indian Economy to Overtake China’s
We are headed to “a world-turned-upside-down moment,” which could come as early as 2016. “That’s when,” Businessweek tells us, “India, always the laggard, may pull ahead of China and become the fastest-growing of Asia’s giants.”
Analysts used to ask, “Can India Catch Up with China?” Now, it looks almost inevitable.
There’s no mystery for the change in narrative. In a five-week-long election ending in May, 541 million voters went to the polls, and most of them demanded fundamental change. They rejected the ruling Congress Party of the Gandhi family, which had dominated national politics since independence in 1947, and gave a newcomer, the charismatic Narendra Modi of the Bharatiya Janata Party (BJP), an absolute majority in the Lok Sabha, the lower house of Parliament.
Modi had previously created a boom while serving as chief minister of a coastal western state. “He provided Gujarat with India’s first real free-market economy that led to new infrastructure and job creation,” said Subrata Mukherjee, a retired political science professor at Delhi University, to Bloomberg. A central pillar of Modinomics is that large businesses create jobs and prosperity.
In his short time as prime minister, Modi has traveled to Japan and the United States for meetings with Prime Minister Shinzo Abe and President Obama and has hosted China’s leader, Xi Jinping, in New Delhi. A central element in Modi’s summitry has been obtaining investment commitments; he’s thus far gotten a total of $100 billion, according to his own count.
“Now it is the turn of the states to capitalize on the opportunity,” he says. “The roads are wide open. The states that are ready can walk away with a major share.”
Whether India’s state governments take advantage of the opportunity depends on whether they “de-bottleneck,” make available land, build infrastructure, and issue permits.
Gujarat did those things when “SuperModi” ran it, but he now sits in faraway New Delhi, which has only limited influence with state officials.
Yet Modi’s sweeping election victory not only brought his party to power in the capital, it changed the mood across India. As the Wall Street Journal’s Geeta Anand and Gordon Fairclough report, voters this year rejected the subsidies and giveaways of the Congress Party because they wanted India to become a larger version of Gujarat. The breath of Modi’s victory, therefore, signals a clear rejection of the socialism of India’s founders. No wonder Indians speak of the “Modi wave.”
The new mood can be seen in Madhya Pradesh, the landlocked Indian state with a population of 73 million and a growth rate of 11 percent last fiscal year. There, Chief Minister Shivraj Singh Chouhan, also from Modi’s BJP, says it’s time for even faster growth. “In the field of agriculture, Madhya Pradesh has reached its peak,” he told Bloomberg in an October 9th interview. “Now we need to move toward industrialization.”
Not all of India’s 29 states and seven union territories will now follow Chouhan’s Madhya Pradesh, but those that don’t will get left behind, which means they will, in all probability, eventually begin to look for investment as well. The strength of India’s federalist system is that the best ideas compete as states and territories vie with one another. And now that there is a business-friendly ruling party in power, economic prospects for the country look brighter than they have for years.
It’s about time. In the fiscal year ended March 31st, India grew a relatively unimpressive 4.7 percent, the second consecutive year of growth below 5 percent.
It may take a few years for India to get back to 9-percent-a-year expansion, but now the country is at least moving in the right direction. The Central Statistics Office reports that gross domestic product was up 5.7 percent in the quarter ended June 30th, compared to the same period a year ago. In the previous quarter, growth was 4.6 percent.
Rajeev Malik, an economist with the firm CLSA, thinks that, given the current trends, 2016 will be “a big kicker” year. He predicts 7.2 percent growth then. He forecasts China’s will be at 7.1 percent.
Move over, China. In a decade, India could have both the world’s biggest population and fastest-growing major economy. Yes, it’s premature, but we can see why Modi talks about our era as “India’s century.”
There’s no mystery for the change in narrative. In a five-week-long election ending in May, 541 million voters went to the polls, and most of them demanded fundamental change. They rejected the ruling Congress Party of the Gandhi family, which had dominated national politics since independence in 1947, and gave a newcomer, the charismatic Narendra Modi of the Bharatiya Janata Party (BJP), an absolute majority in the Lok Sabha, the lower house of Parliament.
Modi had previously created a boom while serving as chief minister of a coastal western state. “He provided Gujarat with India’s first real free-market economy that led to new infrastructure and job creation,” said Subrata Mukherjee, a retired political science professor at Delhi University, to Bloomberg. A central pillar of Modinomics is that large businesses create jobs and prosperity.
In his short time as prime minister, Modi has traveled to Japan and the United States for meetings with Prime Minister Shinzo Abe and President Obama and has hosted China’s leader, Xi Jinping, in New Delhi. A central element in Modi’s summitry has been obtaining investment commitments; he’s thus far gotten a total of $100 billion, according to his own count.
“Now it is the turn of the states to capitalize on the opportunity,” he says. “The roads are wide open. The states that are ready can walk away with a major share.”
Whether India’s state governments take advantage of the opportunity depends on whether they “de-bottleneck,” make available land, build infrastructure, and issue permits.
Gujarat did those things when “SuperModi” ran it, but he now sits in faraway New Delhi, which has only limited influence with state officials.
Yet Modi’s sweeping election victory not only brought his party to power in the capital, it changed the mood across India. As the Wall Street Journal’s Geeta Anand and Gordon Fairclough report, voters this year rejected the subsidies and giveaways of the Congress Party because they wanted India to become a larger version of Gujarat. The breath of Modi’s victory, therefore, signals a clear rejection of the socialism of India’s founders. No wonder Indians speak of the “Modi wave.”
The new mood can be seen in Madhya Pradesh, the landlocked Indian state with a population of 73 million and a growth rate of 11 percent last fiscal year. There, Chief Minister Shivraj Singh Chouhan, also from Modi’s BJP, says it’s time for even faster growth. “In the field of agriculture, Madhya Pradesh has reached its peak,” he told Bloomberg in an October 9th interview. “Now we need to move toward industrialization.”
Not all of India’s 29 states and seven union territories will now follow Chouhan’s Madhya Pradesh, but those that don’t will get left behind, which means they will, in all probability, eventually begin to look for investment as well. The strength of India’s federalist system is that the best ideas compete as states and territories vie with one another. And now that there is a business-friendly ruling party in power, economic prospects for the country look brighter than they have for years.
It’s about time. In the fiscal year ended March 31st, India grew a relatively unimpressive 4.7 percent, the second consecutive year of growth below 5 percent.
It may take a few years for India to get back to 9-percent-a-year expansion, but now the country is at least moving in the right direction. The Central Statistics Office reports that gross domestic product was up 5.7 percent in the quarter ended June 30th, compared to the same period a year ago. In the previous quarter, growth was 4.6 percent.
Rajeev Malik, an economist with the firm CLSA, thinks that, given the current trends, 2016 will be “a big kicker” year. He predicts 7.2 percent growth then. He forecasts China’s will be at 7.1 percent.
Move over, China. In a decade, India could have both the world’s biggest population and fastest-growing major economy. Yes, it’s premature, but we can see why Modi talks about our era as “India’s century.”
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