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Author: Anne Krueger, former deputy director general, IMF
During an economic conference in the early 1960s, an speaker began his presentation on development by citing India as an example. Before being able to continue, an economist interrupted and asked: “What other country in the world is like India?” The room is silent. To date, this question remains unanswered.
Earlier this year, Prime Minister Narendra Modi announced that India aims to reach the status of developed countries by 2047, the centenary of his independence from the British Empire. This ambitious objective, which could transform the Indian economy and reshape the global economic landscape, has generated a general excitement.
But reaching this step is not an easy task. Conservative estimates suggest that the growth of per capita income of India should exceed China of 3.5 percentage points each year to reach the objective of Modi 2047. While India has experienced a strong annual growth of six At 8% in recent years, the economy has already shown signs of slowdown. In addition, even if a slowdown can be avoided, the maintenance of this momentum in the next two decades will be difficult.
India is a country of extremes. It has a flourishing software industry and its biometric identification system, Aadhaar, has enabled the government to coordinate public services for the largest world population. And India is home to world class universities, in particular technology institutes and management institutes.
From rural to urban
But the transition from India from rural employment to Urban has lagged behind most developing countries, exacerbating inequalities. While the country has 167 billionaires, more than 129 million people still live below the poverty line. These disparities extend to the education system, where more than half of the country’s fifth year students find it difficult to read at a second year level.
At the end of the Second World War, China and India were both poor countries with large populations. More recently than the 1980s, their standard of living was almost identical. The Chinese command and control system was based on the property of the state of almost all means of production, while the model of India combined private property with government control over the key industries.
Four areas require urgent attention: labor, education, trade and regulations
None of the two systems produced positive results. In the early 1980s, China began to implement radical economic reforms, inaugurating an era of spectacular growth. India, caused by a foreign exchange crisis, followed a decade later. But although the country’s GDP growth has accelerated, it has never matched the rapid pace of China’s economic rise. In its last global economic perspectives, the International Monetary Fund estimated the per capita income of India at $ 2,730, against $ 13,140 in China.
Despite the current economic challenges of China, most analysts expect it to reach the status of developed countries by the 2040s. For India to do the same, it must approach several flagrant economic weaknesses . But since the pace of reforms has slowed down in the last decade, it is not clear if it can bring together the political will to continue the necessary changes to achieve the objective of 2047.
Four areas require urgent attention: work, education, trade and regulation. The restrictive labor laws of India, which make workers’ launch extremely difficult, present a particularly serious political challenge.
Industrial growth has been relatively slow, leaving a large part of the workforce trapped in low productivity rural jobs. Consequently, while 46% of the active population of India works in agriculture, the share of manufacturing workers increased from 12% to 11% between 2023 and 2024. In addition, strict regulations of India on Overtime, learning, health care and other advantages considerably increase the employer Fresh.
Powerful unions still dissuade companies from hiring unskilled workers, forcing employers to invest in equipment equipment rather than extending their workforce.
Productivity improvement
To respond to demands for today’s global economy, India must revise its education system. Although it has considerably increased academic registration rates, the quality of education – in particular at primary and secondary levels – is not sufficient to build a productive workforce. A main engine of the previous economic reforms of India was the relaxation of tight controls on foreign trade and capital flows. But within the framework of Modi’s “Made in India” policies, the country has returned to protectionism, imposing prices and erecting other obstacles to importation while subsidizing the domestic production of essential goods. This protectionist turn throws a shadow on the growth prospects of India. Without a rapid expansion of industries and exports with a high intensity of labor, it is doubtful that the country can maintain the growth rate necessary to reach the status of developed countries by 2047.
Another major concern is bureaucratic requirements and expensive license requirements, which are increasingly hindering economic activity. Previous efforts to rationalize regulations have caused significant improvements and stimulated growth, but achieving the ambitious objectives of Modi will require a new wave of daring structural reforms.
The state of the global economy in 2050 will partly depend on the speed and efficiency of India implements these changes. Given good policies, the country could reach high income status by 2047. Otherwise, it risks remaining an intermediate income country plagued by low productivity and slow growth.