Why India is well poised to be the next economic superpower
If you take a random person in any part of the world and ask the question ‘which country is the current global superpower’, the answer on most lips would undoubtedly be the United States of America. The economic, cultural and militaristic influence that USA has all across the globe is unmatched. But as can be evidenced through history in the case of the British Empire and the Soviet Union, it is difficult to maintain the superpower status till eternity.
Already, there are many chinks visible in USA’s armour. The deadly debt financed wars in Afghanistan and Middle East diverted massive economic resources. The 2008 financial crisis further compounded matters for the economy. Every year since 2013, American policymakers have to get together annually to increase its debt ceiling limit so as to ensure that the economy does not fall off a fiscal cliff. The Gross National Debt currently stands at around $18 trillion thereby reducing USA’s ability to flex its economic muscles. Given that USA has in a way maxed out its credit card, it may soon face a situation which can threaten its superpower status.
There are very few countries in the world which can claim to be in a position to dethrone USA as superpower. The potential superpowers which can rightfully claim this position are Brazil, Russia, India and China or popularly known as the ‘BRIC Nations’. These Emerging Market stalwart nations have the necessary ingredients that can propel them into superpower status. Each of these four countries has a high global share of GDP, land mass as well as population. Earlier there were predictions that Japan has the potential to emerge as the next superpower but a combination of continuous slow growth and an aging population gradually destroyed its potential to be a superpower.
Amongst the BRIC nations, Brazil is considered the weakest link and looking at the current situation it will be the least likely to emerge as a superpower. The country is currently going through its deepest recession in 25 years. Its Government is also entangled in a massive corruption scandal very much like what the Congress Government battled in India. Russia and China are dominant powers in their own right and have consistently countered USA’s might over the years either through military or economic prowess.
In the Syrian crisis, Russia is challenging US military directly by backing Assad’s regime to the hilt. Vladimir Putin is also gaining more global credibility in the war against ISIS, much to the chagrin of Obama. But the year 2015 is turning out to be an extremely difficult year for both Russia and China. Russian economy is in deep trouble due to the sanctions imposed by USA and the crash of oil prices. Like Brazil, Russia too is in deep recession and its currency Ruble has devalued significantly against the Dollar.
China too has been an economic powerhouse for the past few decades. Over the past 30 years, China’s GDP growth rates have averaged a phenomenal 10%. China is perhaps the only country which has come close to US in terms of economic supremacy. China sent global shock waves when its stock markets collapsed a few months back. Its growth slowdown is causing fundamental and structural shifts in its economy. IMF has suggested that China consciously slow down its economy further to avoid a hard landing for itself. Overall, Chinese policymakers are grappling with multiple issues like real estate bubble and high Government debt. To solve the underlying problems, China is undertaking a transition which may take years to unfold.
While the economies of Brazil, Russia and China are facing deep-rooted structural issues and are slowly unravelling, India finds itself in a fairly comfortable position. Of course, India is not immune to the global slowdown. Indian exports declined for the 11th consecutive month in October but since India is a net importer of commodities, the collapse of commodity prices has greatly benefitted India. This led to a decrease in our trade deficit from 6.5% in FY13 to 1.4% in FY15. The GDP growth rate is also robust but it is difficult to compare it to previous periods due to a change in calculation methodology. With the fall in interest rates and inflation, India is in a decent macroeconomic position. Taking everything into consideration, when compared to other potential super powers, India is in a remarkably unique position of economic advantage.
Frankly, the global circumstances present an incredible opportunity to India. Foreign investors have very limited options to invest other than India. To them, India is an oasis of growth and stability. It also helps immensely that we have Narendra Modi as Prime Minister who understands the importance of foreign investment. PM Modi has experienced the benefits of investment driven development during his tenure as Chief Minister of Gujarat. These first-hand experiences have helped him develop initial initiatives like Make in India and improving ease of doing business which will go a long way in attracting investors.
Every other day, more and more sectors are being opened up to FDI. We are truly seeing the unrolling of the proverbial red carpet for foreign investors rather than the usual red tape. If this initial momentum continues, India will be able to fully exploit the sweet spot that opportunity has placed in our laps. While the other major economies are mired in wars, debt and economic stagnation; India is focussed on economic development and prosperity. This way, India is taking the first steps in attaining the status of an economic superpower. It is a long and uphill battle to reach those heights but the journey has certainly begun in full earnest.