Prime Minister Narendra Modi has advocated for India to become a developed nation by 2047 as a new national aspiration on Independence Day this year. This highlights the question of the chicken and the egg – is the relationship between development and enrichment sequential, does one lead to the other, and if so, which comes first? ? More specifically, does being developed mean being rich or being sustainable?
A developed economy has four characteristics. First, competitiveness – a country able to fund its infrastructure needs while maintaining fiscal stability. Second, human capital with the bandwidth needed to generate sustainable economic growth. Third, respect for human rights, the principle of equity (including gender equity) and deeply institutionalized mechanisms to hold the state accountable. Fourth, security deterrence and institutional capacity to participate effectively in international forums and networks.
According to this definition, being rich is not the same as being developed. Many economies dependent on the export of oil and gas, for example, might be wealthy today, but their economies are unsustainable, many lack human capital and import basic skills, and most do not conform not up to human rights standards or contribute effectively to international networks.
Conversely, China is an upper-middle-income economy on the verge of becoming a high-income economy. India is a lower-middle-income economy that could become an upper-middle-income economy before 2040. But both have, albeit varying, attributes of developed economies, as do several others in South Asia. South and Southeast, Africa and Latin America.
Wealthy nations (formerly high-income economies) are defined by the World Bank as those with a gross national income per person slightly above the global average. For 2023, it is set at $13,200 (Atlas method, which converts GNI data from national currencies to current US dollars by averaging exchange rates over three years to remove volatility and local inflation spikes). India is at $2,170 (2021).
Over the past 25 years to 2021, India’s GNI per capita has grown by 7% per year. Over the next 25 years, we are expected to double our per capita growth momentum from the 4% per year we achieved between 2012 and 2021. Slowing population growth leading to a stable population by 2047 will also contribute to keep the denominator low. .
Unfortunately, even a relatively high growth rate of 8%, compared to a supposed growth of only 2% per year in the world economy (which grew by 3.2% from 1996 to 2021 and 1.3% from 2021 to 2021)
still won’t get us across the income divide in the rich world by 2047. This conundrum also applies to similar or poorer economies or those that depend primarily on the export of fossil fuels.
The Prime Minister knows this well. Perhaps this is why “being rich is glorious” – a paradigm that China adopted at the start of its liberalisation, is rejected by India because “being developed (viksit) means more than just being rich” .
This resonates with everyone, especially in a time when the riches gained by plundering the planet are taking their toll. Focusing on development rather than wealth creation might be singled out by some, as “the grapes are sour” blame for an economy that will never be wealthy. But a lot depends on the development model we follow.
Consider, for example, if we diverted resources to fully greening our economy, well before 2070, when we committed to Net Zero; overhauled our education system to provide high-quality, future-compatible services to the bottom half of our population, including through a massively expanded state-funded scholarship program for technical studies while Ayushman Bharat targets cheap insurance coverage for ubiquitous and quality health care, we could score high on development even though it remains an upper-middle-income economy.
The future lies in technology-driven innovation, as the Prime Minister emphasized on August 15. However, innovation requires open borders and international collaboration. It does not sit well with fractured silos (friend-shoring, near-shoring) which limit the flow of venture capital to finance innovation and reduce opportunities for the development of new processes and products, both of which are essential for commercialization. sustainable.
It is possible that the existing fragile international order will settle into some sort of uneasy settlement between the United States, China and Russia. A three-way deal to cut their losses and cooperate to stem further economic damage might be statesmanlike for an American president; suit a powerful President Xi Jinping, in his third term from November this year, and give an exit with honor to President Vladimir Putin. The European Union, already too old and too comfortable to endure a prolonged conflict, sighed with relief and returned to the status quo. One can wonder, however, if this would only be a respite or a stable arrangement.
Messages emanating from international forums underline the need to preserve oneself in an uncertain and turbulent world. The multiplicity of deep diplomatic ties in order to derive benefits requires sustained commitment and the instinct of a professional. An empowering and risk-taking private sector is a huge enabler, as is an improved institutional architecture with diverse skills. Both are still nascent, although Prime Minister Narendra Modi’s government has been confident on this point, with the added benefit of long term tenure.
India, acting internationally as a pragmatic, non-preaching middle power, would be new to its citizens. The public responds best to news feeds from our political masters who seem to impress outsiders with our spectacular past or outsmart foreign governments in high-profile negotiations. Collegiate deals, where favors are traded for good team play, rather than individual brilliance or ideological consistency, make poor copy.
At home, the deepening of democracy through the empowerment of local governments – which was Mahatma Gandhi’s dream – remains unfulfilled. “Sabka Vishwas, Sabka Prayas” – awakening the spirit of participatory nationalism – demands that elected grassroots political leaders be substantively integrated into the national power-sharing architecture. Less than a third of the current members of the Lok Sabha started their political life in local bodies, which speaks for itself. China’s success owes as much to the pervasive Communist Party system as it does to the virtues of a meritocratic career path from local politics to provincial assemblies to the National Assembly.
We must anchor national programs in local participation for organic growth and integrate national aspirations into regional and international priorities, if we are to be a valued global partner embodying the mantra of frugal development before wealth – an option that suits the most nations today.