The Indian economy has languished over the last few years. A potent combination of corruption, policy paralysis and high inflation had all combined to put a huge question mark over the Indian growth story. However, things have certainly improved over the last one year or so. The Modi government has certainly pushed for growth. By legislative and executive action, the government has certainly shown the right intent. In a world where growth is either falling or non-existent, India is in a bright spot.
India's new method of calculating GDP may need some time to be widely understood and accepted. What is certain though is the fact that it will certainly make India the world's fastest growing major economy soon! As per the chief economist of the IMF, Christine Lagarde, India is marching forward in the right direction. It's important to note here that the IMF had in October 2014, reduced its forecast of global GDP growth to 3.5% in 2015 and 3.7% in 2016. India of course, is defying this trend.
Lagarde believes, as do we at Equitymaster, that a favourable demography is at the core of India's growth story. Consider these astounding facts: More than 50% of India's population is below the age of 25. About 12 million people join the workforce every year; a staggering 1 million a month! By 2030, India's labour force will be the largest in the world (over 1 billion).
However, it would be unwise to take growth for granted. To grab the demographic dividend many reforms will be needed. These will include not just economic reforms but also reforms in the bureaucracy and judiciary too we believe. In the economic sphere alone, the major ones include reforms related to subsidies, fiscal discipline, opening up of various sectors, banking reforms, the ease of doing business, labour reforms, trade reforms, tax simplification, energy security, and more!
It will be a long journey indeed. To be fair, the government has taken many good steps. However, a lot more will need to be done if India is to lead the world in terms of economic growth and take our rightful place among the world's leading nations. As the old adage goes, well begun is half done!