India Where the Fireworks Come From
In light of the impending general elections in 2024, we dive into India’s unique strengths that we believe will help its economy to maintain a high growth rate.
India’s economic reforms began in 1991 when it underwent an acute balance of payments crisis, with the country at one stage having only three weeks of import cover remaining. The government’s immediate response was to secure $2.2 billion from the International Monetary Fund (IMF) by pledging 67 tons of gold reserves. Fast forward three decades, and the country has foreign exchange reserves of $646 billion and its per capita income rose by nearly eight times to $2,411 in 2022.
These wealth gains have been made possible by an impressive average GDP growth of 6.1% since 1991. What is even more impressive is that India is expected to continue to outperform its peers in the coming decades. The economy is expanding robustly in the near term, and the long-term growth potential looks favorable as well.
The Organization for Economic Co-operation and Development (OECD) projects India’s potential per-capita GDP growth to overtake that of China in 2026 and remain above China’s throughout the forecast range (until 2060) implying sound fundamental drivers. Note, however, that this refers only to the growth rate and not the level, and India is not expected to rise above China’s economic size during that period.