India: Two Hundred Years
India as a World Power
For Principled Neutrality
A New Appraisal of Indian Foreign Policy
Has India an Economic Future?
America and Russia in India
India and the World
India After Indira
Against Nuclear Apartheid
India and the Balance of Power
The India Model
America's New Strategic Partner?
India's Democratic Challenge
The Promise of Modinomics
How the New Prime Minister Can Bring Back Growth
Modi's Money Madness
Will the BJP Learn the Wrong Lessons From Demonetization?
India at 70
The World's Biggest Democracy Celebrates Its Birthday
Will India Start Acting Like a Global Power?
New Delhi’s New Role
AN ECONOMY UNSHACKLED
Although the world has just discovered it, India's economic success is far from new. After three postindependence decades of meager progress, the country's economy grew at 6 percent a year from 1980 to 2002 and at 7.5 percent a year from 2002 to 2006 -- making it one of the world's best-performing economies for a quarter century. In the past two decades, the size of the middle class has quadrupled (to almost 250 million people), and 1 percent of the country's poor have crossed the poverty line every year. At the same time, population growth has slowed from the historic rate of 2.2 percent a year to 1.7 percent today -- meaning that growth has brought large per capita income gains, from $1,178 to $3,051 (in terms of purchasing-power parity) since 1980. India is now the world's fourth-largest economy. Soon it will surpass Japan to become the third-largest.
The notable thing about India's rise is not that it is new, but that its path has been unique. Rather than adopting the classic Asian strategy -- exporting labor-intensive, low-priced manufactured goods to the West -- India has relied on its domestic market more than exports, consumption more than investment, services more than industry, and high-tech more than low-skilled manufacturing. This approach has meant that the Indian economy has been mostly insulated from global downturns, showing a degree of stability that is as impressive as the rate of its expansion. The consumption-driven model is also more people-friendly than other development strategies. As a result, inequality has increased much less in India than in other developing nations. (Its Gini index, a measure of income inequality on a scale of zero to 100, is 33, compared to 41 for the United States, 45 for China, and 59 for Brazil.) Moreover, 30 to 40 percent of GDP growth is due to rising productivity -- a true sign of an economy's health and progress -- rather than to increases in the amount of capital or labor.
But what is most remarkable is that rather than rising with the help of the state, India is
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