Can we get there?

In an interview to the Press Trust of India (PTI) in September, Prime Minister Narendra Modi expressed optimism that India would become a developed country by 2047, when it would be hundred years since achieving independence. Specifically, in response to a question about India’s status in the “Amrit Kaal year of 2047”, the Prime Minister said, “By 2047, I am sure that our country will be among the developed countries. Our economy will be even more inclusive and innovative.” This statement must surely have pleased many Indians, especially those who suffer enormous deprivation and live on the margins of India’s GDP growth story. But what exactly does it mean to become a developed country and what is the experience of others who have journeyed to this status? Importantly, how likely is it that Modi’s words will become reality and what policies could take us closer to that goal?

There isn’t a fixed definition of developed countries, but lists compiled by international institutions such as the World Bank (WB), the International Monetary Fund (IMF), and the United Nations (UN) provide a reasonably good idea of what a developed country looks like. The World Bank’s classification system, which is updated every year, divides countries into four income groupings: Low, Lower-middle, Upper-middle, and High Income. The UN Human Development Index (HDI) classifies countries according to their level of human development -- Very High, High, Medium, Low. The IMF classifies economies as Advanced or Emerging Market and Developing Economies (EMDE). It is safe to say that high income countries in the World Bank system that are very high in HDI terms and Advanced from an IMF perspective are “developed”. India is currently lower-middle income (World Bank), medium HDI (United Nations) and EMDE (IMF). For reference, China is upper-middle income (WB), high (HDI), and EMDE (IMF). 

From this perspective, some of the developed countries include the United States, Japan, and Germany. As expected, each of them is in the highest categories of the three institutions. However, there are countries that fall into one institution’s top category but not of another. Georgia has very high human development, but the World Bank classifies it as an upper middle-income country. Hence, for our purpose, Georgia is not a developed country while South Korea is developed because it is in the highest category of all three institutions. 

What can India learn from the trajectory of developed countries? For this, let us focus on Asian countries, because India is often compared to them. In terms of per capita income, India is at about $2,500. Singapore was at $2,500 around 1975, South Korea in about 1985, and China got there around 2006. While South Korea and Singapore are now both developed, China is not. China, with a per capita income of $12,850 today is still below the World Bank’s high income cut-off of $13,846. China also has to catch up with other countries on the HDI, which includes not just income but also life expectancy and education levels. Finally, the IMF is more selective in which countries are classified as ‘advanced’. While the World Bank lists 83 countries as ‘high income’ and the HDI includes 66 countries in the ‘very high’ category, the IMF only includes 42 countries in its ‘advanced’ group.  The Gulf nations, for instance, are listed as EMDE,
not ‘advanced’. China remains distant from the developed country status despite its breath-taking economic progress since the late 1970s and two decades after breaking the $2,500 per capita income mark.

Given that India’s GDP growth is often highlighted when speaking about India’s future prospects, it is important to see what happened to growth in other countries as they became better-off. In the case of Singapore and South Korea, economic growth declined in each decade after the two countries crossed the $2,500 per capita income mark. In China, growth has declined especially sharply since hitting that milestone. If history is any guide, India will see lower, not higher, economic growth rates in the future, and certainly not the double-digit growth China averaged for four decades. 

How then did per capita income grow so much in these other countries? That happened because population growth was low during the years that Korea, Singapore and China were still growing. This dramatically shifted per capita incomes on to a higher trajectory.

But how does population growth slow down? That is where the UN’s HDI comes into the picture. Countries that have high human development typically have lower population growth. Singapore and South Korea had relatively high HDI scores in 1990 (0.727 and 0.737). However, China (0.484) and India (0.434) were much lower and closer together. Since then, while both China (0.768) and India (0.633) have improved their HDI scores, the gap between them has increased, suggesting that India needs more improvements in health and education to complement economic growth.

The preceding illustrates a basic point: India is unlikely to achieve ‘developed country’ status along the axes defined by all three global institutions by 2047. But that is not important. What matters is that we pursue developed country status resolutely, because that will enable a decent life for hundreds of millions of Indians. However, status quoist policies will not work. From the role of the State to reforms of factors of production, a lot has to change. Without substantial improvements in human capital, India can’t achieve much. When Indian schoolchildren are performing at academic levels comparable to those in Malawi, one cannot dream of competing with China. Climate change and the impact of disruptive technologies make a transformative course correction not just inevitable but urgent. 

Most importantly, we must focus not just on the endpoint but on the journey itself. If we make India’s development more inclusive, if we avoid damage to the social fabric, and if we keep people at the centre of development goals, India will be a happier country in 2047. That’s a goal worth pursuing.

(The writer is an economist and author and is Deputy Chairman of the All-India Professionals’ Congress)