New World Development Indicators reveal Indian economy is improving

New World Development Indicators, 2017, have been released by the World Bank and it is time to take stock. I have compared India with Brazil and China to gauge India’s progress or lack of it. The interesting factor is that now data are available for 2015 and 2016, the first two years of the present government. Thus, a comparison of 1990 (pre-liberalisation), 2010 (United Progressive Alliance 1 or UPA 1) and 2016 (first two years of the Bharatiya Janata Party or BJP) should be of interest to discerning readers. 

To begin, looking at population growth rates in 2016 — 0.8, 0.5 and 1.1 for Brazil, China and India, respectively — it is clear that population policy in India requires continuing attention (Table 1). This is important since, even in 2016, the mortality for under 5’s remained 43 for 1,000 births in India in contrast to 15 in Brazil and 10 in China, while secondary school enrolment also lagged behind (not shown). Nevertheless, just as in the other two countries, India has made steady progress in containing population growth rate and in reducing mortality rates over the entire period, though India needs to speed up implementation if it is to ever catch up with the others. 

In emerging economies, urban population growth is often a result of poor absorptive capacity of the rural sector, in particular agriculture, and therefore of involuntary rural-to-urban migration. Urban population growth is a measure of it. In all three countries the rate has declined which is a good sign. However, urban population growth rate continues to remain highest in China, despite bringing it down at the highest speed. 

In terms of macroeconomic indicators, India’s gross domestic product or GDP growth rate in 2016 stood slightly above China’s though, in 2017, this will likely get reversed. Also, both countries lost quite a few points in GDP growth since 2010 (Table 2). In their 2016 GDP break-up, China’s high industry share continues as per cent of GDP (40) in contrast to India’s (29). India’s higher services share (54) than China’s (52) is reflective of a higher residual that perforce has to absorb new labour. The trends reveal higher links in the case of China to the global economy than for India. As per cent of GDP, both countries suffered significant losses in exports and imports in terms of GDP, again revealing setbacks in global trade. 

This had concomitant effects on gross capital formation which went down in terms of GDP in both countries though India’s decline was more rapid. Thus, in 2016, China still managed 44 per cent of GDP in foreign direct investment (FDI) in contrast to India’s 30 per cent. Curiously, in 2016, military expenditure in terms of GDP was noticeably higher in India — 2.5 per cent — than in China or Brazil but in both Brazil and India, their numbers have steadily decreased over time. By contrast, it has remained the same in China at 1.9 per cent during 2000-16 raising serious doubts about the reliability of this information. 

The 2016 difference in their international debt service as a per cent of exports of goods and services is stark — 51, 5 and 17. Brazil is a highly indebted economy, explaining the economic doldrums it faces intermittently, while China has pursued, by and large, an over-depreciated currency policy to propel exports and contain imports. India stands in the middle, though caution is needed as international oil prices firm up and the rupee continues to depreciate faster than optimal for enhancement of trade (when considered as exports plus imports). Note that, in 2016, FDI in Brazil was almost double that of India, China’s being almost four times that of India. There are many reasons for this but important explanations include substandard government-provided economic infrastructure, a thin modern labour sector, slow improvement in ease of doing business, and lethargic reform in the tax structure and its administration. Finally, India’s continuing poor, developing country status is confirmed by the net official development assistance in dollars. Though this number is not updated, India’s receipts remain multiple times higher than that of Brazil while a net outflow has actually begun from China. 

Some micro-indicators regarding high technology orientation reflecting modernisation, inform curiosity. Mobile cellular subscription per 100 persons increased rapidly in all three countries and, in 2016, India’s number (87) was competitive with China (97) and Brazil (119) (Table 3). However, individuals using the internet as per cent of population lagged behind in India (30) in contrast to China (53) and Brazil (60). About 87 per cent of India’s mobile subscriptions are with private providers. Broadband — optical fibre cable for the internet — however, has been slow in coming. India’s lower education levels may not yet enable its wider population to use internet even as much of its population are already familiar with rudimentary functions of a mobile phone. Also, high technology exports as a per cent of manufactured exports are 13, 25 and 7, respectively, for Brazil, China and India, thus pointing in the direction of India needing to catch up with its competitors. 

To conclude, trend analysis establishes India to have made continuing progress in its economic indicators though an international comparison reveals that progress has not been fast enough, and that India needs to speed up the changes if it has to keep up, leave alone catch up, with China. Further, it cannot be set aside that India has had the most abject record in poverty, income distribution and wealth concentration indices in modern times and among modern economies as I have reiterated in recent columns.