India – The Future of a Giant

currency demonetization in india 2016

India was the focus of an event at the Diplomatic Academy: a country which is given much too little attention internationally in comparison to its economic strength and development.

Since the New Delhi Consensus in 1991, India has changed greatly.

The country has opened up to foreign investments and has caught up with the economic boom which other Asian countries had already experienced. The final great step for India on the path to being a world leader will be taken in the next 15 to 20 years,

according to Samir Saran, advisor to the Indian government and theĀ World Economic Forum for South East Asia. He sees four major trends for this period of time:

  1. In 20 years, India’s gross domestic product, with an increase of 6-8%, will rise to 10 trillion dollars, thereby including the country in the list of one of the largest global markets. However, institutions will not grow as quickly as the economy and this will lead to problems.
  2. In 2037 India will provide approximately 10 billion dollars to other countries as development aid which will result in India becoming an important player in this area. The country will export its own ethos and experiences to other countries and, because of this, could possibly enter into conflicts with the ideas of China or the OECD.
  3. As the military power will only grow half as much as the economy (India’s tax-to-GDP ration is only 16%), India (in contrast to China) will not plan any interventions or participate in peace missions.
  4. Due to the strong technological orientation, the country will not need cheap labour. It has hardly any cheap resources and (due to nationalist tendencies worldwide) only limited access to the world market for its growth.
Samir Saran
Samir Saran

Further, Saran recognises four trends which will form India in the next two decades:

  1. The great project of the 20th century was for the State to provide education, infrastructure and social safety. The State either dealt with this directly or by means of licences for private organisations. In the 21st century, companies in the technology and pharmaceutical sectors are at the heart of the development in India and these do not want State influence but rather free markets.
  2. The last census in 2011 showed that the cities are growing faster than the rate at which the new residents can be taken in. In villages, conflicts are resolved by the community – this no longer functions in the anonymity of the city. This leads to blockades and demonstrations which Saran refers to as the ruralisation of cities.
  3. The demographic development shows a growing group of 5 to 25 year olds who, in the meantime, number 450 million. In the case of support of other countries, India has to do more for its youth, Saran said with a gentle smile: if only 1,000 dollars were given per recipient of education, this would amount to 450 billion dollars per year but India’s total State budget is only 380 billion dollars. There are similar financial problems in the health sector. And in around 30 years, India will have 300 million pensioners who also require financing. Some Indian states have 10% fewer women than men. Here infrastructure and work have to develop as otherwise there could be disruption in these “testosterone fuelled societies”. Approximately 12 million jobs have to be created every year in India – the real figure is currently 7-8 million.
  4. Globalisation will partially break down the blatant difference in Indian society – however, only on the economic level and not on the cultural. It remains to be seen how people will become integrated in this new world.

For the most part, the 116 million Muslims of India live in bad areas. That today they live relatively peacefully is, according to Saran, above all due to the “community management system“: in villages, the elders of families or the village usually seek a settlement between disputing parties.

However, today the size of the family is falling, people are becoming more mobile and are moving away, the old structures are beginning to collapse – with unknown consequences.

According to Suran, India is the first green “miracle of growth“:

despite it having a population twice that of the EU, India consumes only 10% of the energy resources in comparison to the EU. Solar energy is already cheaper than coal.

Process innovation is India’s greatest strength. One billion Indians already own a mobile phone, the number of internet users grows by 8 million per month. By means of the Digital Citizenship payment system, even small amounts can be transferred without any charges. The digital transformation of India has quickly and efficiently reduced the costs for the economy and the population. For example, the health system, has been centralised via the digital community management system, whereby much bureaucracy has been spared.

The fear that the reduced bureaucracy will lead to many unemployed is not shared by Saran:

due to the increase in self-employed and part-time work, which, above all have been created as a result of the dismantling of the previously blocking bureaucracy, these unemployed can be absorbed. Furthermore, today’s world has grown closer and offers can be made worldwide via the internet. For India, the transition to the digital world has been much easier than for the majority of western countries due to many factors.

Mobility is extremely important in India – but not that of a physical nature: of 1,000 inhabitants, only 9.82 possess a car. The country focuses on digital mobility, transport routes are “uberised“.

According to Saran, an asymmetry dominates in Asia:

the economically strong countries such as China or India are not the big players in the military sector while others, such as Russia or Pakistan, although strong in military terms, are rather insignificant in economic terms. The border conflicts which regularly arise in Asia (Vietnam, Kashmir, South China Sea, etc.) are related to the digital but also the cultural changes of the countries.

The states are increasingly putting emphasis on self-defence instead of co-operation and the level of provocation is constantly high. The great peacekeepers in Asia are nuclear weapons.

In relation to China, Saran believes that India will be at a disadvantage in 10-15 years:

this is the price of democracy. He does not consider the one belt one road strategy and the associated high investments in infrastructure projects to be useful because, at the latest in 25 years, we will be able to print everything that we need in life from a 3D printer. Further, in particular in the context of the re-orientation of the USA, India is to be understood as the most important pioneer of the liberal world order:

if India falls, liberalism is dead. One would like to counter the growing nationalism with a healthy patriotism: too many countries have abandoned the international project in order to withdraw into their own borders.

The Indian expert is worried about who will assume the role of the officer friendly in the internet, which exists in India, in western social media. The bullies use the internet better for their own purposes than the masses: in order to combat these, there have to be community organs.

Translation German-English: Donna Stockenhuber


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currency demonetization in india 2016 currency demonetization in india 2016 Kottakkalnet CC BY-SA 4.0
Samir Saran Samir Saran Christian Janisch CC BY-SA 4.0