India can be next global powerhouse; barriers remain: EIU
New Delhi, Nov 12: India can be a China-like global growth powerhouse of 2020s, but it needs to address several challenges including infrastructure and gender gap to realise the potential, Economist Intelligence Unit has said.
"India is the only country that has the potential to change the world in the 2020s in the way that China changed it in the 2000s. It will probably take a little longer than that before India really takes off but, even so, it is going to be a global growth powerhouse of the 2020s," EIU's Chief Economist Simon Baptist said.
In a newsletter, Baptist further said that a key driver could be expanding India's industrial base. Acknowledging that this was indeed the idea behind the government's ambitious 'Make in India' campaign, a policy to turn the country into a manufacturing hub, he said "the preconditions for a Chinese-style take-off of manufacturing do not yet exist in India".
His comments follow a special report on 'what is needed to unlock India's growth potential', prepared by EIU for ABB, a global leader in power and automation technologies.
"Basic skills and education are at a much lower level than they were in China in 2001, when its manufacturing sector globalised. There is a huge gender gap -- narrowing in the case of education for girls, but still wide in employment.
"A long-standing electricity deficit and massive infrastructure needs from urbanisation are also key challenges," Baptist said.
On positive side, India has one thing that China has -- the potential to be of interest as a huge market in its own right, as well as a base for export manufacturing.
"One thing holding that back is the maze of state-level regulations and the lack of a truly national single market. While state-based competition can be beneficial, as those states with the will can move faster, those barriers will need to be removed for India to really capitalise on its potential," Baptist added.
A number of economists as also the government leaders have talked about India replacing China as the next driver of global economic growth, but a number of experts have warned about the challenges that India faces to achieve this feat.
Identifying India as one of the 'few bright spots' in an otherwise gloomier global economy, IMF has also projected that Indian economic growth is set to be higher than China's.
Finance Minister Arun Jaitley has also said that the world needs more growth engines after the recent slowdown in China and India is well-positioned to capitalise on this opportunity and its economic growth is expected to improve despite global headwinds.
After a drubbing for the NDA alliance in politically important Bihar state elections, the Modi government has this week announced a slew of reform measures including for the power sector and on FDI regulations as it looks to reinforce its image as a growth-focussed regime.
About results of the Bihar polls, Baptist said in a tweet that "India will still be growth hotspot, but we are revising down our 2018-2020 forecast as Bihar problem means no upper house majority for Modi".