India@2047: Leapfrogging to the FutureFast Forward

As India faces a new paradigm of shifting supply chains, changing technology frontiers, evolving talent economy and a rapidly changing world, questions arise on how we can ensure that our growth is broad-based, inclusive, and sustainable. “India @ 2047: Leapfrogging to the Future” was the theme of the recently concluded MMA Annual Convention. A host of eminent personalities provided their insight on moving the nation ahead despite the times.

Focus on equity, opportunity & sustainability
Ms Vini Mahajan, Secretary, Ministry of Jal Shakti, Government of India

Looking at 2047, in terms of the economy, there’s no reason why we shouldn’t be among the top one, two, or maximum three nations in the world. It certainly looks like we are very much on track for that. However, we also have a large population. So, the greater ambition lies in per capita terms. Where are we likely to be in per capita terms? We should have overtaken Europe and some other countries that are significantly ahead of us today. When we start talking per capita, we are already getting into micro-level details. So, in a more micro sense, where do we expect to be at that time? When we think of India, whether in a micro or macro sense, we cannot ignore equity. Where will we be in terms of equity in asset ownership, incomes, and opportunities? We are already making strides in improving asset equity, aiming to provide housing, drinking water, and toilets to everyone, which is the goal my department is working towards. We are striving to ensure that everybody has a reasonable level of assets.

Moreover, there are efforts to increase income levels, and we are pleased to see that multidimensional poverty is decreasing rapidly. But what about opportunity? Will we be able to ensure equity in opportunity? Perhaps that means putting more emphasis on skilling, basic education, and healthcare to provide meaningful career opportunities for our youth. Looking ahead to 2047, we must also consider the larger issues around social distinctions, which I believe we are rapidly overcoming.

Supply-chain Challenges

However, let’s step back and contemplate what the world will be like in 2047. India cannot expect to exist as an island; we know that events like the Ukraine war pose both opportunities and challenges even today.

For instance, in the JAL Shakti ministry, where we run the JAL Jeevan mission, we aim to provide potable quality drinking water to every rural household in the country. While we are not responsible for problems in urban areas like Chennai, the global conflict has led to unexpected rises in prices of materials like pipes crucial for our mission. This illustrates how we are part of global supply chains and must remain aware of global challenges.

As we look forward, we hope for a fairer, more just world that is open to economic relations and welcoming to people from around the globe. We envision India as a major economic power, moving towards a fair, just, and egalitarian society, conscious of sustainability issues. In our efforts to improve lives today, we must ensure that we do not harm the environment or deplete resources unsustainably, considering the challenges of climate change and water scarcity.

We hope to see an India where all the stakeholders—corporate and civil society—led by an enlightened government continue to pull together to make an egalitarian and prosperous India. The world has closed its borders perhaps unjustly. In 2047, I hope for a world which will be open to receiving all those youngsters who want to leave India. But I also hope that there won’t be too many such people, and that most of Indians will have the best possible future right here and will stay here.

Entering 2047 with tempered optimism

Dr V Anantha Nageswaran, Chief Economic Advisor, Government of India

By the end of March 2024, we will have grown at more than 7% for three consecutive years post-Covid. The Reserve Bank of India estimates 7% growth for FY 24-25 as well, and that would make it four years in a row. That is not a fluke. It must reflect some important things which we are getting right. What is it that we are getting right?

Not enough attention or recognition is being given to the way the pandemic was managed. We did not impose a nationwide lockdown after the very first lockdown of March 2020. The rest of the Covid experience was left to individual states and sub-national governments to decide when and what kind of restrictions to be imposed on movement of people and goods and services. That was a very important decision taken and that enabled the country’s economic activity to resume reasonably quickly after the first deep contraction we experienced between April and June 2020.

Digital Public Infrastructure

The second aspect of Covid management was the development of indigenous vaccines and the ability to administer that to a country of nearly 140 crore people. In the process, we developed certain technologies which are going to become part of the health stack for India, and which other countries can also benefit from. In some sense, Covid played an important part, in the digital infrastructure built out of India. We have taken extraordinary efforts in the last eight to nine years in building out a digital public infrastructure that has now become the envy of many other nations.

For example, if you look at the UPI, even several advanced countries haven’t got the kind of unified payment interface, including the fast retail payment and the architecture that comes with it. They don’t have a system that is anywhere near ours. It is not just a matter of efficient transactions even for small denominations. It is also about ensuring that the economy becomes formal, as every single transaction gets captured.

Tomorrow when an individual or a business person wants to avail financial resources, you have a track record to show and that is revolutionizing the way in which credit decisions are made by lending institutions.  Financial inclusion, digital public infrastructure, and other exciting possibilities such as Open Network, digital commerce, and Open Credit Enablement Network are all going to make a very big difference to the inclusion of every single geographical part of India and every segment of the population into economic activity.

Energy Management

The third thing which we need to very well appreciate is that post the Ukraine conflict that broke out in early months of 2022, the government of India has taken great efforts to ensure energy supplies adequately and at reasonable prices, given the kind of geopolitical pressures we faced in terms of securing crude oil supplies. One of our sources of supply—Iran—was under sanctions and then Russia came under sanctions. India is a very large energy importer. Therefore, to be able to ensure that the economic recovery did not get disrupted by lack of adequate crude oil supplies, was a great effort by the government of India. I think that is very much under-appreciated and it needs to be recognized. The energy security that we have now is also going to come under pressure due to the energy transition requirements.  

Strength of Financial & Corporate Sector

The other thing that is going well for us at the moment is the strength of the financial sector and that of the corporate sector in India, both of which, we were missing in the second decade. We had extreme optimism about India’s place in the world in the first decade but things didn’t go according to plan. The 2008 crisis intervened, and many decisions and investment plans made assuming that such a crisis would not happen went wrong.  

Bad debts accumulated in the banking system. Companies found themselves saddled with extremely high levels of debt in their books. Both the lenders and borrowers had to downsize and trim their balance sheets to get back into good shape. The cleaning up of the financial system and corporate balance sheets took a considerable portion of the second decade. Today, both of them are in good shape. The financial sector’s balance sheets are very strong in both non-banking and banking. Lending is vigorous, whether it is for MSMEs, small ticket mudra loans or personal loans. Non-food credit excluding personal loans, is growing at around 13%. For an economy where the nominal GDP growth rate is between 11 and 12%, this is a good credit growth rate as well.

Subject to other geopolitical and external risks, we are on a good wicket to grow the economy steadily towards milestones such as 5 trillion or 7 trillion or 30 trillion by 2047. But milestones are only important placeholders. It is not just a matter of philosophy, but also a matter of practical wisdom, that we only have control over our actions. The outcome is residual.

Don’t Forget Past Mistakes

A few years ago, it was said that China would overtake the United States in terms of overall GDP size. But today, many people say that it may not happen forever, given the way the Chinese economy is struggling to recapture the kind of dynamism it had for nearly 30 years, between 1979 and 2009. So, things can change quite rapidly and we cannot take them for granted. We must continue to focus on what we can do to ensure the outcomes that we want to see.

The most important thing is not to forget the mistakes that got us into trouble in the second decade in the financial sector.  We need to learn from those mistakes to do better lending appraisals and make better investment decisions from the corporate side. Businesses always find regulators to be of nuisance. But they don’t realize that regulators are here not to pose hurdles for the growth and development, but to ensure that businesses continue uninterrupted much longer. If you look at the history, our growth spurts have been more of sprints, rather than marathons.

Within a few years of good growth, excess optimism takes over and we end up making bad investment, bad borrowing and bad lending decisions. We get into the spiral of overheating in the economy; inflation shoots up, current account deficit picks up and the currency becomes overvalued. We find ourselves going back to square one. That should not happen.

If we look at the decision that the Reserve Bank of India took recently, to increase the risk weights on unsecured personal loans, or for that matter, many of the restrictions and regulations that Sebi is putting in place to ensure that capital market is a fair place, are necessary. These will help us grow long term sustainably rather than experience brief growth spurts. Therefore, a better understanding of what it takes to continue to grow long term is necessary for us as citizens and businesses.

We all saw how a relatively unhealthy population became more vulnerable to the impact of Covid. Today, I see multinationals speak of India as the next frontier for processed food and it makes me worried. The data on child obesity and child diabetes is alarming. A healthy population is a productive population. 

It used to be said of China that it may become older before it became richer. India should not become sicker before it becomes richer. The responsibility lies with us as individuals. It is not just the government’s job to regulate.  When we talk of 2047, the most fundamental requirement is not government policies or investments in infrastructure but a healthy population that is physically fit and mentally healthy.

The AI Threat

When we talk of skilling, we know that artificial intelligence is there. It can be a tool or something that displaces workers. IMF recently put out a working paper that included economists among the various skill categories, which are highly exposed to artificial intelligence. It is good news that economists can be replaced by artificial intelligence, because naturally intelligent economists haven’t really done a great job.  

Humans cannot simply anticipate all the effects of this new technology. Many things, we realize only when we actually start to experience them. Humans have a natural limitation in their ability to predict. We must become nimble and prepare our youngsters to be able to participate in an economy which is going to be dominated by technology. We are a labour rich country. We have demographic advantage with us, but the population to be employed has to be productive and healthy. Without that, the demographic dividend will not be realised.  When we consider our goals for 2047, we must see to it that our population is skilled in the appropriate areas and at the right levels, while also creating employment opportunities for them, both domestically and internationally.

Geopolitical Risks

Geopolitics is a very existential risk for this decade and the rest of the 20 years as we head into 2047. Many books that came out during the pandemic time and also subsequently talk about the inevitability of long cycles. Every 80 to 100 years, cycles repeat and so, relative peace at the global level might be disrupted this decade or beyond.

Some of us may think that a multipolar world is better than a bipolar or unipolar world. There will always be unintended consequences of a multipolar world. The world does need sometimes, one powerful leader. If it doesn’t have one, and has multiple leaders with multiple fiefdoms, it will be a difficult world to navigate.

Geopolitics is also an extremely important component of the current ongoing challenges and debate with respect to climate change. At one level, global warming is a reality. At another level, it is also a threat to economic convergence between developing and developed nations. In the name of climate change, or fighting climate change, developed nations impose their priorities on developing nations. They dictate the kind of fuel to be consumed, the energy mix we need to have, and the kind of growth we can have. The economic sovereignty of nations comes under severe threat, because of the climate change agenda.

The Energy Conundrum

Because we are an oil importing nation, we may think that renewable energy is good for us. However, to have renewable energy dominate our energy production mix, we will be still dependent on critical minerals and rare earths coming from other countries. How are we going to ensure the supply of these materials and minerals? How do we recycle the used solar panels and wind turbines? They are becoming a challenge for several other countries and cities.

If we take into account the battery storage technology around the world, there are limitations in the storage. The sun doesn’t shine and the wind doesn’t blow all times of the day.

So, how are we going to ensure grid stability? What is the true cost of our energy? When we take into consideration renewable energy and fossil fuels, what is the kind of mix we need to have? There are environmental challenges that are raised when we think of nuclear energy as an option. Can we wish it away at all? These are important questions, because just like health, without energy security, the plans and the dreams we have for 2047 will not be met. Therefore, navigating this landscape- technologically, financially and politically, is something that we need to take care of.

We must ensure that we continue to grow without sacrificing our growth priorities. Countries in the developed world are worried about carbon emissions at this point. As a per capita carbon emitting country, we are one of the lowest in the world.  

So, can we leapfrog into 2047? I would like to temper that expectation or optimism. We must have the most appropriate mindset.  It is about patience, persistence, perseverance and paranoia, which will lead to performance. Merely extrapolating recent trends into the long-term future has not really served humanity well. While we need to be optimistic, confident, and have pride in our abilities and resources, it’s equally important to realistically assess the challenges and prospects ahead. We must acknowledge our cognitive limitations and the inability to predict all possible outcomes. We have miles to go and mountains to scale. Recognizing that there are significant obstacles to overcome, we can navigate towards our goals for 2047 with awareness and determination. This awareness will ultimately take us to the promised land.