The elections are here. Promises run rampant.
Everyone is excited about India being among the fastest growing large economies. Many millions are expected to be lifted out of poverty sooner or later.
Is this true? When will we see the benefits of this growth? Will we attain, say, the current American standard of living soon?
GDP is the language of our times. Though GDP, as it is currently measured, is an inadequate and inaccurate measure of economic health or human happiness and prosperity, lets use it as a guideline for a simple analysis.
The per capita income or GDP should matter more to each of us, rather than the absolute GDP & its growth. Of course, a growing GDP will not benefit all people equitably. But, as the saying goes, a rising tide lifts all boats.
Consider the annual growth of per capital GNI of India & a other few countries from 1980 to 2017. (Per capita GNI in PPP dollars in 2017 mentioned in brackets)
India – 7.9% ($7,000)
US – 4.4% ($60,200)
China – 12% ($16,700)
Singapore – 7.2% ($90,500)
Indian politicians and the many optimists amongst us want to believe our current 7% pa growth will continue for the foreseeable future, which is highly unlikely. But, lets humour ourselves.
7% pa growth for the next 25 years will take us to a per capita GNI of about $38,000. In the year 2044, Indian per capita income will still be far below that of US today. We will also be less than half as rich as what Singapore is today. If China also grows consistently at 7%pa for the next 25 years, it will be at $90,000, more than twice as rich as us in 2044.
These per capita GNI projections assume population stays the same as today, which of course will not be the case. Even if India’s population, which is currently around 1.35 billion, plateaus at around 1.5 billion 10-15 years from now due to falling fertility rates, the national income after 25 years will be spread over a larger population than today, which will further reduce per capita GNI.
25 years is a long time. Many of us may not be around. Shouldn’t we look into the near future?
7% pa growth for the next 10 years will take us to just $13,700. In the year 2029, we will still be far behind US, Singapore, China and many other countries. Many millions of Indians will continue to languish in poverty.
If our dream is to attain, say, the current US income level in another 25 years, we need to grow at a phenomenal 9%pa. To attain the current Singapore income in 25 years, we need to grow at a spectacular 10.8% pa.
We could say the strengths of our largely young population, the resulting demographic dividend, increasing education & productivity, greater entrepreneurial activity, & higher adoption of new-age technologies may deliver the goods. But that’s wishful thinking. We also need to reckon with the vagaries of our noisy & unwieldy democratic process & policy making, natural disasters, unexpected geopolitical events, growing pollution & degrading environment etc.
There is no rosy future for many millions of Indians, if we continue business as usual. 7% growth will not lead us to utopia. We will not become America, Singapore or China in 10 or 25 years.
Election promises to spur great economic growth to build a wealthy nation will go nowhere. These promises are just hopes & hypes. We are caught in a myth. A strong persistent myth we desperately want to believe in.
The current dominant economic idea is that a rising tide will lift all boats. Yes, it will. It will lift some boats higher than others. But the tide will not rise as high as we desire it to. The rise will be too slow & in spurts. All boats will not be lifted enough. It will be an endless wait for the right tide.
What is the way out?
Instead of going boating, why not try swimming, kayaking or scuba diving? We could do something altogether different.
We could redefine our notions of growth, wealth, income, consumption, prosperity & happiness. We don’t have to aspire for the per capital GNI levels of America or China. Our standards of measuring our prosperity & happiness can be different. We could choose to grow slowly, more equitably, being more environment-friendly and by consuming less. Thats an experiment we could try out. No other nation has taken this path. We can lead and set an example. The world may become a better place, less frantic about growth and more content with living well.
But, thats easier said than done. No politician will commit hara-kiri by voicing such bohemian ideas. He has to win elections. Grandiose claims are his weapons. Desperate voters & eager supporters cling onto false hopes.