India is not big, creating myths. Although this is a joke, India's recent development momentum should not be underestimated. The Deputy Governor of the Reserve Bank of India predicts that by 2032, India's GDP will beat the United States and become the second largest country.
According to the RBI Deputy Governor's forecast, by 2032, China's GDP will surpass that of the United States to become the world's largest economy, while India will also beat the United States to become the world's second-largest economy.
What is the reason for the RBI Deputy Governor to make such a prediction? Is it a trace, or is it blind confidence?
It would be wrong to say that the predictions of the Deputy Governor of the Reserve Bank of India are not at all likely to come true, and the momentum of India's development in recent years is really not to be underestimated.
The International Monetary Fund (IMF) forecasts India's GDP growth rate of 6.7%, and the Asian Development Bank (ADB) predicts India's GDP growth rate to reach 7% in 2024.
If you don't know much about this growth rate, let's look at the actual growth rate of the United States in 2023.
In 2023, the real GDP growth rate of the United States will be 2.5%, which is not bad as a superpower and the world's largest economy, but it is not much compared to India's growth rate of 7 percent and 8 percent.
India's rapid development momentum in recent years is inseparable from the demographic dividend.
According to statistics from the United Nations Population Division, as of April 14, 2023, India's total population has reached 1.425 billion, which is enough to surpass China and become the world's most populous country.
The most important thing is that India has a large number of people, a large number of young people, a large labor force, and there is no trend of aging, and nearly 75% of the country's population is in the stage of young adults.
Such a large population base and such a youthful and lively age structure provide sufficient labor force for the development of India's manufacturing and service industries.
Since the manufacturing and service industries are mentioned, it is necessary to mention another wise decision of India, which is to get rid of the traditional "one-two-three" development model of industrialization and directly move from the first stage of development dominated by agriculture to the third stage of development dominated by services.
India is known to have a caste system, where the various social classes are very distinct, and the land is in the hands of a small group of high-caste nobles.
The extreme unevenness of resources directly leads to the difficulty of achieving the desired results in terms of scale and efficiency when mobilizing resources.
It is not that India has not thought about developing industry, on the contrary, at a certain stage, India has promoted industry on a large scale in order to achieve the goal of rapid industrialization.
But the results are obvious, on the one hand, the aforementioned extremely uneven distribution of resources leads to the later resource mobilization effect and efficiency are difficult to achieve the expected purpose, and on the other hand, India has been colonized by the British for many years, since independence, it is also mainly agricultural, the industrial base is weak, if you want to develop industry, you need to invest a lot of manpower, material and financial resources, and the income cycle is long, which is not good for India that is eager to develop.
As a result, India has set its sights on the tertiary sector, which is more profitable, has a shorter investment cycle, and has relatively little infrastructure requirements.
According to statistics, from 1960 to 2022, the added value of India's service industry accounted for 48.58% of GDP, nearly half of the country's GDP.
Nowadays, the service industry dominated by the outsourcing industry has become a bright business card of India to the outside world, which not only makes full use of the demographic dividend, but also promotes the development of the national service industry, promotes employment and promotes economic growth.
Just as there are two sides to a coin, there are pros and cons to everything, and we cannot turn a blind eye to India's challenges when we see opportunities for India's development.
We mentioned earlier that the proportion of elderly people in India is small, but we cannot ignore the problem of the high proportion of young children, India's age structure is young, the ratio of children to dependency is large, and a family generally has several children, and even more than ten children.
Child support is not easier than maintenance for the elderly, so the savings rate of Indian households is not very high, with a total savings rate of 30% in 2022.
India also does not pay enough attention to education, which may also be inseparable from the caste system in India, where a small group of people take most of the money and welfare.
The enrollment rate of higher education in India is only 32%, which is far from 72% in China and 84.9% in the United States, which also directly leads to the fact that India does not have many high-quality talents, although the number of labor force is large, but the quality is not high, it is difficult to engage in high value-added activities, which also affects the development of the country's economy to a certain extent.
India makes money and India spends, and India is the grave of foreign-funded enterprises...... What are these claims?
Rather than some obscure technical terms, it is better to use an example to make it simple and understandable.
Xiaomi, Lei Jun, everyone must be no stranger to him, some time ago Xiaomi SU7 was released, and it earned a wave of eyeballs, but he was as witty as Lei Jun, and he also planted a big heel in India.
In 2015, in order to open up overseas markets and enhance Xiaomi's international influence, Lei Jun opened a factory in India, which developed well, so he established 7 large-scale factories in India, providing tens of thousands of jobs for the Indian people and promoting the development of India's economy.
But things slowly fell out of Lei Jun's vision, and the Indian government froze Xiaomi's hundreds of millions of rupees in India assets in the name of tax evasion, and was fined hundreds of millions of dollars.
In this way, the cost of input is aside, which is equivalent to working in India for several years.
Unlike China's practice of releasing fish into water and giving profits to enterprises, India's attitude towards foreign-funded enterprises is to make a fortune, which is very different from ours.
India's approach is tantamount to killing chickens and eggs, focusing only on short-term interests, but not at all for long-term development.
There is another reason why it is difficult for foreign investors to survive in India, and that is that India does not pay enough attention to the binding force of laws and contracts. India places far less emphasis on laws and contracts than China and the United States.
Even if the contract is signed by consensus, the Indian side will be unhappy and will overturn the agreement and violate the content of the contract.
In short, the RBI Deputy Governor is not entirely a dream, but how far it can go depends on whether India is aware of the many challenges it faces and can successfully address them.