Image courtesy Dimitry B.
India will lead the world's growth in future decades but it won't be marked by the consistency of 6-10% growth rates we observed in China over the past decades. India has the economic capacity and readiness to bull forward. They are set to overtake China with the world's biggest population by 2023. Their economic scene is filled with multi-sector global titans and entrepreneurial geniuses. Politically, they've embraced a promising capitalist model for decades that has worked. Internationally, they've defied the need to align, being friends with nearly everyone. However, as India rises, structural cracks will be exposed. The level and stability of their growth rests in the hands of politicians and how well they can fuse the cracks and align those from across vast differences.
Churchill once remarked, "India is just a geographical term with no more a political personality than Europe." India's consists of 29 states. 4 of them have a population that are among the top 15 most populous countries. Across the provinces, cultures and consumer preferences vary significantly. In the book Breakout Nations, the author, Ruchir Sharma, makes this point by sharing the challenge of a Korean retailer. In China, preferences are streamlining and so they can streamline, but in India, it's the opposite. The retailer must constantly adjust to meet widely different demands of widely different consumers. Due to the great diversity Churchill pointed out, and which still exists today, he and other leaders saw the importance for the Gandhi's to be India's great unifiers. To this day, the Gandhi family is still the leading national brand.
The Gandhi's are a political dynasty that help unify the country, but they and the rest of India's political forces must clean up the government and align business forces. According to a McKinsey Global Institute 2014 special report, roughly 50% of public spending on basic services doesn't reach the people. Given that information, it's not surprising to learn that India ranks 81st on Transparency International's 2017 Corruption Index. At first glance, that may not seem so bad, given that China ranks 77th. The difference for China, though, is that their GDP growth rates have persisted despite corruption thanks to a centralized strategy and 90 million party members aligning every powerful company and group to implement the party's strategy. In India, there isn't a strong aligning force. Corruption could much more easily have devastating derailing effects.
India is relying on politician's fortitude to fuse diverse groups, billionaires, and leaders with the country's best interests. The country's 270 million impoverished citizens are especially reliant on them. The good news is that India has made progress on poverty. Rates have decreased from 45% in 1994 to 37% in 2005 to 22% in 2012. The bad news is not only that 22%, 270 million, accounts for enough people to make the world's 4th most populace nation, but also that the official poverty line is imperfect. Using McKinsey's Empowerment Line, a benchmark for an acceptable standard of living based on access to food, energy, housing, drinking water, sanitation, health care, education, and social security, 680 million Indians are deprived of essential needs. There's a ways to go. India needs more politicians like Nitish Kumar in order to pull more people out of poverty. Nitish started cracking down on corrupt leaders in the province of Bihar in 2005. Since then, his province has done an about-face, seeing growth rates catapult from worst to among the best in the country. With the right political strength to match business strengths, the country can creates waves of 6-10% growth rates in the decades to come as the country is slowly fused together.