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Visiting India this week, I was struck by how different the mood there is compared to much of the world. While people in the US and Europe worry about inflation and a possible recession, Indians are looking to the future with trepidation. India is now the world’s most populous country and is also expected to be the fastest growing major economy at 5.9 percent this year. As Prime Minister Narendra Modi said recently, “India’s time has come.”
My concern is that I’ve seen this film before. I remember going to the World Economic Forum in Davos in 2006 and being bombarded with billboards posted all over the Swiss city saying ‘Incredible India!’ and proclaimed it “the fastest growing free market democracy in the world”. In fact, India was growing even faster in those years than it is today, at a rate of more than 9 percent. The Indian trade minister confidently predicted to me at the time that the Indian economy would soon overtake China’s.
That didn’t quite work out. After a few years, growth flattened out, economic reforms faltered, and many foreign companies that had come to the country with great enthusiasm were disappointed. Some have gone entirely. As for China, despite the slowdown in China’s economy, it is now about five times the size of India’s.
And yet I came back from the trip to India optimistic. Although that enthusiasm didn’t fully carry over in the mid-2000s, the country continued to make strides. It has been the second fastest growing major economy (behind China) for about 20 years. However, in recent years, due to a series of revolutions, it has been able to accelerate its growth.
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The first revolution was a government initiative called Aadhaar, which gives every Indian a unique 12-digit ID number that can be verified by fingerprinting or an iris scan. It sounds simple, but it’s, in the words of Nobel Laureate Paul Romer, “the most advanced ID program in the world.” Today, 99.9 percent of adult Indians have a digital ID that allows them to instantly verify who they are, allowing them to set up a bank account in minutes (literally, I’ve seen that!) or transfer government payments directly to recipients and with little skimming and corruption.
The Aadhaar registry is open to all and free, but its most striking feature is that it is publicly owned and operated, unlike in the west where digital platforms like Google and Facebook are private monopolies that can share your data to to make profit. Entrepreneurs can even set up businesses on Aadhaar. And when you use the platform to send money or borrow money, you don’t pay those permanent fees that are so ubiquitous in the West.
The second is the Jio Revolution. Mukesh Ambani, India’s biggest and most ambitious business leader, bet a staggering $46 billion that by offering very cheap phones and data bundles through his telecommunications service Jio, he could get most Indians online. It worked. With most using smartphones as computers, more than 700 million Indians use the internet today. In 2015, India ranked 122nd in mobile data consumption per capita. Last year it was the first to surpass the combined consumption of China and the United States.
The third is an infrastructure revolution that is easily apparent to anyone visiting India. Spending on roads, airports, train stations and other projects has exploded. Government capital spending has quintupled since fiscal 2014, and average national highway construction has roughly doubled, as has seaport capacity and the number of airports. Mumbai is finally building an extensive series of bridges, roads, tunnels and subway lines that could truly connect all parts of India’s premier economic hub.
These three revolutions could really change India this time. But they can do so best by helping with the country’s greatest challenge — reaching out to the hundreds of millions of Indians who remain economically, socially and politically marginalized. As of 2019, about 45 percent of Indians — more than 600 million people — live on less than $3.65 a day.
Nandan Nilekani, the visionary architect of Aadhaar, describes how to create workplaces from the bottom up in novel ways. Instead of China’s top-down approach of building 100 new factories employing tens of thousands, he envisions using Aadhaar to lend to the millions of small businesses scattered across the country. “If 10 million small businesses get loans that allow them to hire two more employees each, that’s 20 million new jobs,” he told me.
The even greater challenge of inclusion concerns India’s women, who still face various pressures not to work outside the home. Female labor force participation in India is low and, amazingly, has fallen from around 30 percent to 23 percent over the past two decades. Among the Group of 20 countries, not even Saudi Arabia is at a lower level. Bloomberg Economics estimates that closing the gap between female and male participation would boost India’s gross domestic product by more than 30 percent over the next three decades.
A focus on inclusion would also ease India’s religious tensions and bring that nation’s Muslims (about 200 million people, one-seventh the country) who face ongoing persecution into the community. It would also be typical of a country that is an open, pluralistic Hindu-majority democracy, a religion almost defined by its pluralism and tolerance.
India has the potential to be admired not only for the quantity of its growth but also for the quality of its assets. And that would really be an incredible India.
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