Guest blog entry by Daniel Tenge-Nottingham, Marketing Intern at CSOFT
Given all the media regarding India in recent times, it is always interesting to come across a skeptical opinion questioning the notion of whether or not this “BRIC” (Brazil, Russia, India and China) country has become a more significant global stakeholder than ever before.
Just by comparing 20th-century India to 21st-century India, we can argue to a large extent that yes, India is rising rapidly in the global market. It is an understatement to say that India’s economic, social, and political reforms have been through a remarkable and dramatic transformation. What was once a third-world country just beginning to develop its economy to compete in the global market about three decades ago, has today transformed into the world’s fifth largest economy in terms of GDP, and only second to the United States in terms of its network of paved highways.
Today, India holds claim to being the world’s largest producer of milk and among the top five producers of sugar, cotton, tea, coffee, spice, rubber, silk, and fish. India’s role as one of the major (economic) forces in the world is all but guaranteed. It is no longer a question of whether India is going to play a major role in world economic and political arenas; it is only a question of what role India will play. Today’s post will highlight some of the main drivers that we can attribute to this awoken titan’s rise.
The Growing Middle Class
India currently has over 17 million households, or over 90 million people, that belong to the middle class; according to the National Council of Applied Economic Research, their earnings fall roughly between $15,000 and $22,000 per year. This same research group has tagged an additional 287 million individuals as “aspirers”—those that hope to join the middle class. These aspirers are making anywhere between $5,000 – $10,000. It is predicted that by the year 2030 these individuals will join the ranks and files of the middle class, increasing this class to a total of 561 million.
That’s more than the entire population of the United States.
As this gigantic middle class increases consumption, they will continue to push India’s economy from the “Hindu rate of growth to a growth superstar”. In the 1970s, India had a poor growth rate (around 2.9 annually). Today, that rate has increased to an impressive 8.8 percent annually. This new middle class seems to be fluent in globalization.
The Growing Younger Generation
Another element that has stimulated India’s economic growth is the country’s young demographic, many of whom have gone through higher education. At a time when a large component of Japan and China’s populations are growing old, the majority of India’s population is under 25 years of age. It is predicted by several experts that India will contribute as much as one-quarter of the world’s workforce over the next half decade. India’s youth now have opportunities that their parents never did. All of a sudden, a farmer’s son no longer wants to—or has to—be a farmer. This younger generation, along with their parents, are a major driving force of India’s economic and global ambitions.
|India’s Phiroze Jeejeebhoy Towers in downtown Mumbai|
Restructuring India’s Infrastructure
For a country to rise to the occasion and be considered a key global stakeholder, more often than not, it needs to restructure its institutions and policies. India came to realize that its policy framework had to be reinvented in order to compete on a global level. The private sector was released from government controls; licensing policies and foreign exchange restrictions were eliminated; and India’s exchange rate began being determined by the market rather than government institutions. The old India had sound institutional foundations but was economically stagnant. By terminating ineffective, bad policies, and by combining new and improved policies with strong institutions, these clean ups continue to catapult India to an ambitious platform in the 21st-century globalization stage.
Then there is India’s advancing green technology industry, another underlying element propelling the country to greatness. With more than 50 million university graduates and approximately 500,000 technical graduates, the country’s software and IT service industries continue to rapidly grow; these industries by themselves contribute more than 0.5 percent of India’s GDP growth. With time, their importance will only continue toi increase, together with India’s other growing sectors, such as pharmaceuticals, textiles, and software. So, as the world becomes even “flatter,” as Thomas Friedman hypothesized, outsourcing exports will continue to boom, making India even more important as a global stakeholder.
India appears to be a rising star, similar to that of its Asian neighbors like China, Japan and the other “BRIC” countries. The problem with India in the ‘70s was that they did not know how to run their market like a market and the state like a state. The corruption that resulted from this period still maintains its presence today. Except, nowadays, India seems to be getting the formula right. Higher numbers of people are entering the middle class, and cybercities are popping up everywhere in India. And the vibrant youth continue to embrace modernity.
The question to ask is, what will be the role of India’s rise in the future? How will Western countries react to or handle this new India? Will the rise of India cause world prices to go up as they consume more? Perhaps, instead of seeing the new India as a threat, other nations should embrace it as another significant global stakeholder and work together to achieve true globalization.
- Felman, Joshua Why is India Booming?9 Feb 2007
- 13 Reasons Why India Can Keep Booming 11 Feb 2004
- Thapar, Manik. India’s Booming Economy 5 Jan 2006
Daniel Tenge-Nottingham was born in Ghana, West Africa but lives in Florida, United States. He is a student at the University of Central Florida majoring in Marketing with dual minors in Political Science and International Business. Daniel came to Beijing for a summer internship with CSOFT after completing his exchange program in Nancy, France. He loves chatting bout business, international relations, community service, soccer, or dancing over a cup of hot chocolate or a bowl of peanut butter-chocolate ice cream!
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