The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Glen Savio Palmer, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
2016 hasn’t started off as well as planned. China’s growth is clearly slackening, and economies like Brazil and Russia (the hyped economies of the early 2000s) will shrink this year. Oil prices too, continue to scan depths. Thus, it’s not a matter of astonishment that international markets seem disturbed, with American stocks having suffered their worst ever start to a year and markets across Europe, Africa, and Asia treading on the same path.
India’s stock market has caught some of these butterflies too. However, looking at the broader picture and studying the macro environment, India appears to be an exceptional bright spot in an otherwise rough neighborhood. Inflation is steadily declining, the rupee’s stability is increasing, and the GDP is growing by over 7% a year, making it the world’s fastest growing economy. India has been one of the few major economies to successfully resist global slowdowns in 2001, 2008, and 2015.
In addition to the contribution of India’s Government during those difficult years, but there are also other broader reasons why India booms while other parts of the world struggle:
- India is starting from a lower base than its peers. An Indian earns an average income of $1,500 a year, hence he/she has more room to grow, compared to an average Chinese earning $7,000 or an American earning $53,000 a year.
- India is blessed with a young population. With nearly 600 million people under the age of 27, most Indians are entering the most productive years of their life.
- India is the greatest beneficiary from cheap oil prices as it is one of the world’s largest and fastest-growing net importers of fuel. With oil trading at below $30 a barrel, India has been able to curb its deficit, cut down subsidies and envision the big technology and infrastructure projects which are pivotal to its future development.
On taking a closer look, we find that India is distinctively positioned to benefit from a noteworthy convergence of global trends.
Considering the case of energy. Developed economies around the world have already spent hundreds of billions of dollars investing in an entire ecosystem of reliable electricity for their citizens. India is nowhere in the picture in this department. Even today, Millions of Indians live in villages that have no access to electricity. Given India’s limited resources, and the huge demand, India turned to coal, which is inexpensive yet murky source of energy. Here comes the role of luck and good timing. At the crucial juncture in time where India needs to double its energy output in the next 15 years, solar energy costs are, for the first time in the history of the world, on par with other conventional sources. It is only going to get cheaper and cheaper. Economists are jokingly calling it a “last-mover” advantage.
India’s so-called last-mover advantage could be applied to many industries: telecom, health care, pharmaceuticals, banking, retail. The R&D has been done in a different place, but thanks to a convergence of size, development patterns, and timing, India is profiting in an unthinkable way. No other point in the history of time could provide a similar last-mover advantage for a nation as large as India.
However, this is only one side of the coin.
All of this could possibly backfire too. There are many hurdles ahead, such as global crises, corruption, political vendetta and competing nations. It is also possible that India’s technocrats have overvalued the amount by which new innovations can propel future growth. Maybe being a last-mover can turn out to be just what it sounds like: being last.
Hence, it is essential for leaders and engineers in India to not get complacent. There is still a lot to achieve. The time is perfect for an impending revolution to come to pass. What is needed is able leadership, bold ideas, confidence, and proper implementation.