5 things that could make or break India's world-beating economic boom

Employees work inside the Mahindra & Mahindra manufacturing plant in Chakan, India, September 30, 2016. Picture taken September 30, 2016. REUTERS/Danish Siddiqui - RTSQMW7

Employees work inside the Mahindra & Mahindra manufacturing plant in Chakan, India Image: REUTERS/Danish Siddiqui - RTSQMW7

Mark Jones
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In 2015, a quarter of a century after liberalising its economy, India grew faster than China. The IMF expects more of the same for this year making India the fastest-growing large economy in the world.

India is also the biggest riser in the World Economic Forum's latest ranking of competitiveness.

That's quite an achievement. Now comes the hard part: sustaining the growth and gains in competitiveness.

Experts and officials at the World Economic Forum's India Economic Summit have identified a range of factors that could accelerate or put the brake on India's economic momentum.

1. External risks

Harvard Economics Professor Gita Gopinath says increases in the price of commodities - and in particular oil - would have an important effect.

There are international headwinds. "There is a real risk to global growth - what is going to happen in Europe, the UK, Japan? There's no way to insulate India from it completely."

2. The Fourth Industrial Revolution and jobs

Rapid technological change in India is raising concerns about the impact on employment.


John Rice of General Electric says education is the key to future-proofing the workforce. That means investment is needed in human capital.


3. Trade

Before the partition of India and Pakistan in 1947, South Asia was one of the most integrated parts of the world. Intra-regional trade then was estimated at about 20% of the total. Now it's more like 5%.

KPMG's Richard Rekhy believes there's a big dividend to be reaped here. He points out that international firms do not yet treat South Asia as a single economy as they do with the European Union. They don't even treat India as a single economy, preferring to focus on individual states.

Samir Saran, Vice President of the Observer Research Foundation, believes that global trade deals are fading and that India needs to do more to create regional alternatives.


One big challenge: getting Pakistan and India working together on this will be critical.

4. The start-up culture

India has a surprisingly vibrant start-up culture and has produced a number of 'unicorns' -- private companies worth more than a billion dollars.

But it's way behind China.


There'll need to be major changes aimed at increasing the scale of start-ups before a growth engine resembling an Indian Silicon Valley is possible.

5. Infastructure

India needs 1.5 trillion dollars for infrastructure investment. The government will almost certainly bear the lion's share. But there's a risk of a Catch-22 situation. Growth requires infrastructure investment. Infrastructure investment requires growth.


Nick Chism expands on his views in this analysis.

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