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Source: The post is based on the article “The First Among Twenty” published in The Times of India on 31st October 2022.
Syllabus: GS 3 – Indian Economy
Relevance: About India’s per capita growth and its forecasts
News: Recently IMF-World Bank meetings have been concluded in Washington. The IMF WEO expects per capita growth in India to be higher than that of China for six years, from 2022 through 2027.
About India’s per capita growth against China
Between 1980 and 2019, China’s per capita income grew at 7. 7% per annum, and India’s at 4. 1%. Between 1980 and 2014, India’s per capita growth exceeded that of China on only two occasions: in 1989, when the excess was 1. 1% and in 1990 when the excess was 0. 9%.
After 2015, India ended this long “drought” and held excess per capita income growth for three successive years. India is now converging to the per capita income of China. According to the projections, the average per capita growth rate for India and China, 2022-27: India 5. 4%, China 4. 3%.
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Why India’s growth story has surprised many, and How has India performed against G20 economies?
India is a democracy, but China is not. Many experts have hinted that democracy is a constraining factor in carrying out economic reforms that could facilitate growth. But despite being a democracy, India has achieved this development.
For instance, G20 countries provide a useful reference point for a comparative analysis of performance of India. The table provides historical data for five groups of countries: India, China, G20 emerging markets (minus India), G20 advanced economies, and G20 itself.
The IMF WEO data reveals a) For the first time ever, EMs and AE exchange rate depreciation has narrowed to near equality for the forecast of period 2022-27, b) Across a number of important economic performance criteria the balance has shifted to the EMs, and c) Within EMs, the baton of leadership has passed from China to India.
So, overall, India’s economy is set to thoroughly outpace its fellow G20 members over the next five years
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