PM's Economic Advisor Outlines India's Growth Trajectory and Global Hurdles in Surat Address
In a significant address in Surat, Prof S Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister of India, delved into the multifaceted factors shaping India's economic landscape, highlighting both historical contexts and contemporary challenges. Speaking at the 31st I P Desai Memorial Lecture hosted by the Centre for Social Studies (CSS), Prof Dev presented a comprehensive analysis titled "Future of India: Challenges and Policies for Growth, Inclusive and Sustainable Development."
Historical Perspectives on India's Economic Standing
Prof Dev began by reflecting on India's historical economic prominence, noting that in 1700, India accounted for 24% of global GDP, surpassing China's 22%, while nations like Japan, Germany, and the United States held minimal shares. He attributed the subsequent drastic decline to the Industrial Revolution, British colonial rule, and other external factors. Post-Independence, India experienced a growth rate of 3.5% from 1950 to 1970, lagging behind East and Southeast Asian countries that implemented economic reforms earlier.
India introduced its own reforms only in 1991, leading to an average growth rate of 6% to 6.5% annually over the past three decades. Prof Dev recalled that in 2013, India was categorized among the "fragile five" economies, alongside Brazil, Indonesia, South Africa, and Turkey, underscoring the nation's evolving economic resilience.
Missed Opportunities and Current Growth Drivers
Addressing India's development path, Prof Dev identified two critical missed opportunities since independence: a lack of focus on labor-intensive manufacturing and human resources in the initial three decades, and a delay of 15 years in economic liberalization compared to peer nations. Despite this, he emphasized that India is now the fastest-growing economy globally, showcasing remarkable resilience.
He outlined key drivers of growth, stressing the importance of increasing the investment rate from the current 34% to around 36% to achieve 7% to 8% growth. While government investment is ongoing, Prof Dev highlighted the crucial role of private sector investment, noting that uncertainty often deters businesses. "I ask them why you are not investing. They say uncertainty. But I tell them you have been saying the same thing for the last decade, and you will say the same thing in the future. I think this is the right time to invest now," he asserted.
On exports, Prof Dev pointed out that they constitute approximately 20% of GDP, with the remaining 80% driven by robust domestic demand and consumption, indicating a primarily inward-focused economic engine.
Global Challenges and the Middle-Income Trap
Prof Dev also addressed pressing global issues, including the US-Israel versus Iran conflict, which he cited as a geopolitical shock impacting India's oil supply and broader economic stability. He linked this to the "twin shocks" of geopolitical tensions and tariff disruptions, which pose risks to India's Viksit Bharat 2047 goals.
Furthermore, he warned of the middle-income trap, referencing World Development Reports that show only 23 out of 101 middle-income economies in 1960 achieved high-income status. "India has to be careful about this middle-income trap, because sometimes, once you go to middle income, the growth rate becomes lower," he cautioned, urging strategic policy measures to sustain upward mobility.
Event Highlights and Academic Contributions
The lecture was chaired by Prof Kiran Pandya, Provost of Sarvajanik University, and featured Prof Dolly Sunny, Director of CSS, who elaborated on the legacy of I P Desai, the founder of the multidisciplinary social science research institute established in 1969. This event underscored the ongoing dialogue between academia and policy-making in addressing India's economic future.
