India is a source of growth for the global economy for the next few decades and it could be what China was for the world economy, the IMF said today, as it suggested the country take steps towards more structural reforms. Here are my 7 reasons India is the key:
- India now contributes, in purchasing power parity measures, 15 per cent of the growth in the global economy (IMF figures) – just behind China and USA.
- India has three decades before it hits the point where the working age population starts to decline. About 600 million people – half of India’s population – are under the age of 25. The next three decades is India’s window of opportunity in Asia.
- The IMF has forecast India’s growth to rise to 7.3 per cent in FY2018/19 and 7.5 per cent in FY2019/20, on strengthening investment and robust private consumption.
- The Indian economy is recovering surprisingly well from the two shocks that started from late 2016: demonetisation and then the implementation issues related to the GST. Long term, the GST is the biggest regulatory game changer in India.
- Reformed insolvency and bankruptcy codes are another big achievement of the Modi Government.
- The Reserve Bank of India is now formally and actively involved in inflation targeting – India has seen the benefits of that have lower inflation and inflation expectations.
- In the pipeline of Modi reforms are more changes to improve the business climate and further steps to liberalise Foreign Direct Investment (FDI).And then there are some of the key smaller steps like things to improve the business climate, steps to further liberalised FDI.
Sure, more reform is needed in labour laws, overall improvement in ease of doing business, more infrastructure activity and dealing with the banking and corporate sector balance sheet issues.
But current evidence is that India will avoid the trap of “growing old before it becomes rich”.