The following chart shows the growth of India’s GDP per capita, as a percentage of the world average, since the commencement of liberalisation in 1991. While growth has been steady, it has paled behind that achieved by China, which commenced a program of liberalisation 13 years earlier, in 1978. Who could forget Deng Xiaoping when he said, “It doesn’t matter whether a cat is black or white, as long as it catches mice?”, meaning that doctrinaire communism or socialism was less important than whether it worked in allowing the economy to grow and raising people’s living standards.
Source: World Bank
India is poised to overtake China as the world’s most populous country, at over 1.4 billion, if it has not already done so. It is expected to grow its economy by 6.1% in 2023 before picking up to 6.8% in 2024, “with resilient domestic demand despite external headwinds,” according to the IMF. India has been one of the world’s fastest growing large economies over the past year, in part because of resilient demand from its big domestic market.
India was hit hard by COVID-19 but has emerged from the peak of the pandemic in better financial shape than many other economies because it did not spend as heavily as most on stimulus relief. Under the business friendly PM Narendra Modi, India’s government is now trying to capitalise on global manufacturers’ diversification away from China to attract more foreign investment. He is also boosting capital investment and infrastructure spending. However, the accounting scandals around the Adani Group have somewhat soured the enthusiasm around India’s growth trajectory.
Although India has grown rapidly in recent years and is highly prospective for making an outsized contribution to world growth in the coming decade, it is coming off a very low base. For purposes of comparison, note the World Bank’s figures for GDP per capita in 2021 (in USD):
India $2,256
South Africa $7,055
Russia $12,194
China $12,556
Japan $39,312
France $43,659
United Kingdom $46,510
Germany $51,203
Australia $60,443
United States $70,258
Switzerland $91,991
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