This brings me to my main thesis: that India may be about to
embark on a new golden age of high economic growth. The key argument runs in these steps:
- There is a near inevitability that there will be a bulge in the working population,
particularly till 2020. This effect will be further multiplied due to enhanced levels of
skills i.e., accumulation of human capital.
- It is likely that this demographic dividend, coupled with strong GDP growth, will
fuel an increase in the savings rate.
- Thus India is likely to fare better than it did over the 1980
to 2000 period, in terms of putting factor inputs into the growth process.
- The policies of the recent years — particularly in infrastructure, reductions of
protectionism, and building modern securities markets — will continue to fuel TFP growth.
- Being a ‘willing globaliser’ will attract greater flow of FDI and technology.
- In addition, India has already shown a track record for obtaining TFP growth over
the 1980-2000 period. TFP growth will show further acceleration thanks to the impact of
information and communication technologies upon the speed of knowledge diffusion and to the
network externalities.
- These elements add up to a scenario where GDP growth in India over 2004 to 2024 will
be much higher than that seen over 1980 to 2004. In the coming decade or two, growth rate in
India may surpass the ‘miracle growth’ rates achieved by other Asian countries. This is not
surprising as India, compared to Japan, China and other high growth economies of Asia, will
have advantage of an access to productivity enhancing IT, which was not available in earlier
decades. This way, we will be cashing in on the ‘late comer’s
advantage’.