The risks to India’s rise

A FEW decades ago, India was a relatively minor player on the world stage. Despite its size and vast population, the country grappled with what became pejoratively known as the “Hindu rate of growth”, with gross domestic product (GDP) increasing at a tepid annual pace of 4 per cent, or 2 per cent per capita from 1947 when it gained independence, until the 1980s. How things have changed. India’s economy has become one of the world’s fastest-growing, with GDP rising at an annual average rate of 6.2 per cent since 2006. But can India sustain this impressive performance?

A reason why independent India’s economy took so long to grow fast is that the government heavily regulated domestic economic activity for decades, imposing stringent controls on international trade and discouraging foreign investment.

But in 1991, a deep economic crisis forced India’s government to pursue reforms that opened the way for a rapid expansion of trade. India’s share of world exports rose from 0.5 per cent in 1991 to 2.6 per cent in 2022, and its share of trade in commercial services reached even greater heights, contributing to a sharp increase in incomes.