For the past two centuries, much of the western world has been incredibly wealthy, while the rest of the world was not so fortunate. However, there was an incredible economic reversal around the 1970’s and 80’s, where so-called
‘third world’ economies began to grow faster than many of their first world counterparts. One of these developing countries was India. The country’s GDP has increased roughly six-fold since 1990, and today is growing by more than 7 percent per year, considerably higher than the global average, 2.6 percent.
According to a 2017 study, India will hold as much as 15 percent of global wealth in the year 2050, surpassing both the United States and the European Union So, how did this happen? Well, economic growth is primarily fueled by two factors: how many workers a country has, and how much these workers produce. India has an incredibly large pool of working age people. Out of the country’s population of more than 1.2 billion people roughly 65 percent are under the age of 35. There are also a ton of jobs, due, in large part, to globalization. Many multinational companies have not only outsourced labor and manufacturing to India, but also marketing, managerial and customer service jobs. This saves the company money in labor costs and keeps the entire manufacturing process in sync. Outsourcing is a huge contributor to India’s growing economy, but there are other factors at play too.
One is what economists call “catch-up growth”. This is when poorer countries, like India, adopt technologies that have already been developed by richer countries, effectively ‘catching up’ to them. This could be anything from high-speed rail to automated machinery to the internet. For instance the Indian government just recently launched an initiative to provide broadband internet and mobile network services to hundreds of thousands of Indian villages. Another factor is India’s free-market reforms, which have ushered in less regulation and more foreign investment.
The country has also benefitted from the global slump in oil prices, as it imports two-thirds of its oil. Some politicians, notably President Donald Trump, have pointed to the rapid growth of India and other developing economies as a sign that the US is lagging behind. But the comparison isn’t so cut-and-dry. According to experts, poorer economies tend to grow faster than wealthier economies. Essentially, when money enters a small pool of wealth, the growth will be much more dramatic than the same amount of money in a larger pool.
The US economy is currently growing at about 2 percent, and experts say growing the US economy at a rate any higher than 5 percent would be virtually impossible. And in fact, the country hasn’t grown at that rate since the 1980’s, when it was recovering from a recession. There are also fundamental differences in the way the US and India regulate their economies. India has a six-day workweek, few federal holidays and no legal retirement age for the private sector. And although the country has laws regulating child labor, they are rarely enforced. UNICEF estimates that roughly 28 million children are working in India. This obviously adds a huge amount production to their economy, although at the expense of human rights.
There’s no doubt India’s economy is growing many, many times faster than the US. But these numbers come far from painting a complete picture. Economic growth fails to account for standard of living, work-life balance, and perhaps most importantly, per capita income. The average income in India is still just $1,600 dollars, compared to nearly $56,000 dollars in the US, and more than 20 percent of its population live in poverty. India will surely continue seeing an influx of wealth as its workforce grows. However making life better for those workers is another feat altogether. India’s growth is expected to suffer from its recent decision to demonetize much of its currency.
Author-
Mr Fitness ( Infophysique.in )
