India: A success Story

Article authored by jain and govil – astute political observers

Much is talked about India, but most of the talking points are dated. India is emerging as a success story for democracies to survive and thrive in these turbulent environments. Given below are some of the data points that support the narrative. While India has some grounds to cover in becoming a developed nation, the financial story is worth noting. In this article, we will talk about the macroeconomic factor and in subsequent articles, we will talk about the initiatives that are currently underway towards the road of becoming a developed nation.

GDP Growth Rate

Gross Domestic Product (GDP) is a key indicator of measuring the economic development of countries. When mainstream media talks about economic development mostly we hear about China. The reality, however, is that China is not even amongst the top 10 fastest growing economies. The top ten list of fastest-growing economies is given below. India is the only trillion-dollar economy that makes this list.
In fact, as per International Monetary Fund World Economic Outlook (April 2018) report, China is expected to continue to have slow down with expected GDP growth rate of 5.530% in 2023 compared to India where the GDP growth rate will continue to see acceleration and touching 8.198% in 2023 making it the fastest growing economy.

Source: http://statisticstimes.com/economy/countries-by-projected-gdp-growth.php
Another thing to note is that there is not even a single country from either North America or Europe in the top 20 list. Let’s see how some of the trillion-dollar economies fare in terms of projected GDP growth rate in next 5 year (year 2023). I have taken the data from International Monetary Fund for GDP and growth rate and combined the two data points to create a composite for easy understanding.

So why the obsession with America, Europe, and China? Based on this data, India is projected to have the fastest growth rate amongst trillion-dollar economies. India is poised to not only become the fifth largest economy by 2018 but is expected to be amongst the top three economies of the world by 2023.

Foreign Direct Investments

Another factor that demonstrates the confidence in a country’s ability to sustain the growth is the Foreign Direct Investment (FDI). Given below is the data from UNCTAD Global Investment Trends Monitor for FDIs into various countries. All figures are for 2016 are estimates.

All figures above are in $million.
Absolute figures tell one story but if we look at the FDI as a ratio of the GDP we see that India (1.69%) surpasses China (1.12%) in FDI.
For the year 2018, however, the World Investment Report published by UNCTAD suggests a drop of 23 percent to $1.43 trillion.

Industrial Production Growth Rate

The third factor to consider is the industrial production growth rate - one of the most important factors in assessing the countries’ outlook. This is a list of countries by industrial production growth rate mostly based on The World Factbook, accessed in December 2018.

It is no surprise that India tops the list and that too with a huge margin!

Household Debt to GDP ratio

Finally, let’s look at the household debt to GDP ratio. This ratio is interpreted in many ways. My perspective is that the higher ratio suggests a lower GDP growth rate since consumption has little room to grow compared to a lower ratio where GDP growth rate has a higher potential to accelerate. As we can see that India has the lowest household to debt to GDP ratio. If this ratio becomes at par with the average of the economies with GDP greater than India, then the household debt to GDP ration will stand at 64.62% which essentially will translate to a GDP boost of $1,394,802,610,000 making it 4th largest economy overtaking the United Kingdom and German.

In conclusion, I have analyzed and triangulated the data on three critical dimensions – GDP growth rate, FDI as a percentage of GDP and Industrial growth rate. Further, I provided a perspective on GDP growth rate potential linked to household debt and I conclude that India is the country to be paying attention to.

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