As China’s economic growth slows, people
are looking for the next big driver of growth. And India seems to fit the bill. The IMF estimates that India will be the fastest-
growing major economy in the world this year, which is why companies like Walmart are
paying top dollar for business deals in India. It’s projected to expand by 7.4%,
putting it ahead of China. So, what’s driving India’s growth? India has a population of 1.3 billion, making it
the second most populous country in the world. It’s on track to grow faster, even
surpassing China’s population by 2024. And that big population
is also really young. India is on track to reap a
handsome demographic dividend. This effect happens when a
country’s working age population is larger than the
non-working age population. By 2050, India is expected to have a working
population of more than one billion. While many Asian countries are aging,
India’s population has a median age of only 27.3 years, compared to
China’s 37.6 and Japan’s 47.1. Since Prime Minister Narendra Modi
came into power in 2014, his government has attracted
record foreign direct investment. Modi has been credited for his strong reform
agenda to improve India’s business environment. The World Bank gave a nod to his
efforts, improving India’s ranking in its Ease of Doing Business
ranking from 130 to 100. But India’s growth is like my cricket game –
full of promise, but it hasn’t quite delivered yet. India grew faster than China
between 2014 and 2016, but lost its fastest-growing
major economy title last year. Within the country, domestic investment has fallen
as businesses have been hesitant to invest. India’s exports have also dropped since
Modi came into power, despite his Made in India campaign meant to fire
up the country’s manufacturing industry. Economists say that domestic
developments are to blame. In November 2016, the government’s withdrawal
of 500 and 1,000 rupee notes shocked the country. 86% of the country’s currency
could no longer be used in shops. Then, while businesses were
trying to recover from that policy, the government implemented the
goods and services tax in July 2017. It’s the biggest tax reform
since India’s independence, consolidating India’s many
taxes into a single structure. But it’s also baffling businesses. For instance, should coconut oil be taxed
as a cooking product, or a hair product? Is a chocolate coated biscuit
a chocolate or a biscuit? The two policies on tax and demonetization
hit consumption and investment hard, despite most economists agreeing
that the goods and services tax will bring long-term benefits for India. This year, India is likely to keep its title as the
world’s fastest growing major economy. But is fastest fast enough? Former IMF chief economist and
India’s former central bank governor, Raghuram Rajan has said that
India needs to grow much faster. India has about one million people
entering the labor force every month. So that's a big number that has to be
absorbed which means we need significantly more growth
to get them good jobs. But India’s growth this year
faces serious challenges. Top ratings agencies like
Moody’s and Goldman Sachs have cut their growth
projections for India. Why is that? One reason is rising oil prices. That could mean higher import
costs and higher inflation. India is the world’s third biggest oil consumer,
after China and the United States. Because of low oil prices, which
fell to about $40 per barrel in 2016, Modi’s government could put
taxes on petrol and diesel. India has become
dependant on these taxes, which made up 17% of
India’s total revenue last year. The Indian rupee is also the worst
performing currency in Asia this year, and it’s expected to weaken further. This may look like just a humble
pakora, but this Indian street snack has ignited a huge debate
about jobs in India. This year, Modi was asked about the perception
that he failed to create more jobs for young Indians. His response? Such as pakora sellers. His comments caused outrage in India, because
there is a lot of anxiety for stable, salaried jobs. More than 25 million people, a number
greater than Australia’s population, applied for less than 90,000 jobs
on India’s state-run railways. For the most junior role
in Mumbai police force, 200,000 people applied
for 1,137 openings. Many multi-national companies are
excited about India, dreaming about selling fast food, smartphones and fast
fashion to a rapidly growing middle class. But right now, that middle class with income
levels of similar populations in cities like Hong Kong and Singapore is extremely tiny,
estimated to be just about 1% of India’s population. The double whammy of a weaker currency and
growing oil prices are going to hit India hard. Despite its challenges,
India continues to grow quickly. But will it be it fast enough
to benefit its people? Hey everyone, it’s Xin En.
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