It is by now common knowledge that the Government has announced its intention of realizing the vision of a “Viksit Bharat” by the year 2047. On the face of it, this level of ambition is laudatory and it can even be argued that countries need a goal to strive for. People tend to forget, but the former President APJ Abdul Kalam as far back as 1998 put forward a country-wide plan called “Technology Vision 2020” which was also a road map for transforming India from a less-developed to a developed society in about 20 years.
But first, one must be clear about what constitutes “Viksit Bharat” or a developed country. One yardstick is clearly the dollar per capita income using criteria established by the World Bank. The other, most relevant for India, is the percentage of population living in poverty. There may be other criteria, but these two are necessary conditions that must be fulfilled. The very first World Development Report ( World Bank 1978) used the Gross National Income per capita as a criterion for deciding whether a country is low income or not. The World Bank currently recognizes 26 countries as low-income based on a GNI per capita of USD 1135 or less. By the same token, there are 54 countries which are designated as lower-middle income with GNI per capita between USD 1135 and USD 4465. There are 54 countries again which are called upper-middle income with GNI per capita between USD 4465 and USD 13,845. And there are finally 83 countries which have achieved high-income status with GNI per capita of USD 13,845 or more. For the uninitiated, the main difference between GDP and GNI is that while the former measures the value of goods and services produced within a country, the latter measures the total income earmed by a country’s people and businesses. The GNI is more people-centric as a criterion, although GDP gets more traction in economic literature. Certainly, for India where inequality is rampant, the GNI is arguably a better criterion to use.
India, with a GNI ofUSD 3.5 Trillion (2023) had a per capita of USD 2540 putting it bang in the centre of the category of lower-middle income countries. Indeed, we are some distance away from hitting the ceiling in this group which is USD 4465. In order for India to become upper-middle income it has to achieve a per capita of USD 4465 and be closer to USD 13, 845, at a mimimum, if it seeks the label “Viksit Bharat”. This at current population levels means a GNI of at least USD 18 Trillion or about five times our current GNI. Not impossible to achieve by 2047, but the task is nothing less than daunting. Bear in mind that even then we will not be a high-income country, technically speaking.
On the even more important criterion of the percentage of population living below poverty, everything hinges on how you define poverty. Extreme poverty is defned by the World Bank as USD 2.15 per head per day, which in my view is too low a threshold to apply to India. By this measure less than 10 per cent Indians are in extreme poverty. But the USD 3.65 per head per day determined by the World Bank reflects poverty in a typical lower middle-income country such as India. By this measure we could have as much as 44 per cent of the population living in poverty in India. This is also borne out by the decision of GOI to continue the Pradhan Mantri Garib Kalyan Yojana till December 2028 – under this scheme, 800 million people receive heavily subsidised grains and lentils every month. It is the large numbers of poor that acts as the biggest drag on our potential to become “Viksit Bharat” anytime soon. If this problem is to be tackled meaningfully, India needs to focus on education, skills and jobs, with laser-sharp focus.
Not to compare, but China’s GNI for 2023 was a whopping USD 19 Trillion with a per capita of USD 13,400. And that makes China on the threshold of a high-income country. China, by its own admission, has gotten rid of extreme poverty and less than 10 per cent of the population live below poverty if the criterion of USD 3.65 per head per day is taken into account. Even so, as Antony Blinken proudly says in a piece he wrote for the latest edition of Foreign Affairs, the GDP of the US at USD 28 Trillion still outflanks the combined GDP of all the three countries below it, namely China, Japan and Germany. Crucially, there is a difference of USD 10 Trillion between the GDP of the US and that of China at present.
India’s challenge is also compounded by the fact that China grew under a much more propitious external environment characterised by hyper- globalization and by following a high-carbon pathway to development. Both these are no longer viable options for India. The external environment has turned very protectionist and the world is simply not in a mood to allow India to burn fossil fuels at will, something China did (and continues to do) with impunity. But the real challenge for India is also that it must not become old before it becomes rich. This may seem counterintuitive, but the threat is all too real, if the latest estimates from the UN Population Fund are to be believed.
The World Development Report (2024) just released by the World Bank makes very interesting reading in light of the above. The report focuses on the “middle-income trap”. It talks of the ambition of some 108 countries (inlcuding India) with incomes per capita between USD 1136 and USD 13,485, to reach high-income status within the next two or three decades. This is far from easy. The report points out that only 34 countries have made this transition since 1990. It nevertheless identifies pathways for emerging market economies to avoid the “middle-income trap”. The report points to the need for not one but two transitions during middle income. The first transition is to go from merely accelerating investment to emphasizing both investment and infusion in which a country diffuses technology domestically, either by bringing it from abroad or by developing it locally. Once a country succeeds in doing this, it can switch to focusing on innovation. So, the “3 i strategy” of investment, infusion (of tech) and innovation is the mantra that the World Bank appears to be chanting. The report gives case studies of three countries that have moved fairly quickly from lower-middle income to high-income levels which should be relevant for India. These are: Chile, ROK and Poland. The most stunning example is that of ROK. South Korea was among the least developed countries in the early 1960s with a per capita income less than USD 1200. But by 2023, it had a per capita of USD 33,000!
India is right to have a vision; all countries must have one. But more important is to have a clear roadmap and policies aimed at achieving the goal. As noted earlier, achieving upper-middle income status (not high-income status though) should be within reach, provided we can get our act together on investment, tecnology and innovation backed by a comprehensive set of reforms executed within a limited time frame.
Diplomacy and Geopolitics 