The World Economic Forum’s India Economic Summit 2009 is underway in New Delhi. A host of ideas - economic and social including growth dynamics, sustainable development, education, climate change, governance issues and investments, will be on the discussion agenda to answer if, how and when India can become an economic super power and to map India’s contribution to the global economy going forward. This could not have happened at a better time, now that the decoupling argument is re-emerging and when India has yet again shown her resilience to external shocks.
So will India become an economic giant? Well, I firmly believe we have the potential to be a formidable economic power by say 2050. Because we have the broad structural framework in place, we have the soft infrastructures functioning smoothly and not to forget our compelling demographics. All we need is to ensure efficient utilization of resources using innovative technologies and find ways to make the growth inclusive. Given that the fundamentals are in place, growth is not an issue, but the key question to ask is whether this is sustainable?
A lot will depend on the policy choices we make now. I am not talking about the policies on investment and governance, or economic inclusion and social welfare. Rather, I am concerned that the state machinery might overlook the importance of the changing environment and opt for seeking merits in the capital-intensive western model of growth. I am not concerned about the growth rate per se, because it is hard to comprehend that an economy with high gross capital formation and savings rate as ours, an economy which is driven primarily by domestic demand and that has development programmes to spend money on should not grow strongly. But what worries me is the sustainability of the growth model or to be more specific, the outcome of such growth in the context of environmental changes. What if after going full steam on a chosen path for say a decade, we realize that the realities of the environment then calls for a different policy approach. What if what we achieve in a decade from now becomes redundant because of misdirected policies?
The future will be dictated more by the realities of the physical environment rather than the economic realities. Sustainable Development is the next world order that will permeate all the global processes. So, what is good for the economy has to be good for the environment. And winners will be those that quickly adapt to the changing growth dynamics and embrace environmentally benign and smarter growth models. No development initiative can afford to ignore its impact on the environmental. In fact future policy making will be guided by the greater environmental well being.
The current level of under-development in India will work in her favour as this will allow her far more flexibility to adopt a sustainable development approach in dealing with environmental pressures than the developed economies. Unlike the West, India need not significantly undo or switch between contradicting models of growth.
India accounted for more than 20% of the world’s GDP in the early nineteenth century but lagged behind in the race as it missed the industrial revolution and subsequent development movements of the west. But the global economic scenario as it stands now provides us a chance to reclaim our glorious past. And this historic opportunity seems to be in our grasp. The onus is on the policy makers, now and in the future to make it happen.