India surpassing Japan in economic size offers no cause for smugness, as per-capita GDP remains lower, according to Claude Smadja.
India is all set to surpass Japan and claim the title of the world's fourth-largest economy, but former World Economic Forum (WEF) Managing Director Claude Smadja sounds a cautionary note. Despite the impressive growth figures, Smadja warns against complacency, as India still trails behind Japan in terms of per capita income and lags in the manufacturing sector.
According to International Monetary Fund (IMF) data, India's per capita income stands at $2,878.4, a mere 8.5% of Japan's $33,955.7. Translation? Japan's per capita income is about eleven times higher than India's.
"Yes, it (economy size) is a good indicator because it gives a notion of the economic weight of the country on the global balance. However, it is not a good indicator because what counts is the per capita GDP. In terms of per capita GDP, India is far below Japan," Smadja told PTI in an interview.
Smadja believes that India's new economic position should not lead to complacency but serve as a stepping stone for accelerating reforms and ensuring that growth translates into improved living standards for all citizens, not just the urban and rural middle classes.
One area where India has a unique advantage is in big data, thanks to widespread internet access, the proliferation of mobile phones, and the national single identity card system (Aadhaar). Big data is being generated at an "exponential" rate, touching every aspect of daily life. Smadja emphasizes the need to protect this strategic asset and leverage it to propel India into the top-tier of global tech and innovation.
However, with this asset comes vulnerability. Smadja warns that US tech giants and policymakers are keen to tap into this data, and with China guarding its data closely and Europe already a focus, India could be the next target. He believes that India's data trove is the foundation for the next wave of technological breakthroughs, including artificial intelligence and deep tech.
To ensure the benefits of this resource reach rural and remote communities, Smadja urges policymakers to focus on skill development and reskilling the workforce, expand the industrial base, particularly manufacturing, increase rural productivity, and accelerate the pace of development and productivity in the rural sector.
In conclusion, while India is poised to join the ranks of the world's top economies, it must addressing key challenges such as global economic uncertainty, inflation, employment disparities, and infrastructure gaps, and implement strategies for growth and innovation in the manufacturing sector and becoming a top-tier tech and innovation player to reap the full benefits of its economic rise.
References:
[1] World Bank (2022). Global Economic Prospects, June 2022.
[2] Organization for Economic Co-operation and Development (2022). Economic Surveys: India, 2022.
[3] National Council of Applied Economic Research (2022). India in 2022: Challenges and Opportunities.
[4] Reserve Bank of India (2022). Report of the Expert Committee to Review the Monetary Policy Framework, February 2022.
Insights from Enrichment Data:
- India's economic growth is affected by global economic conditions, including slower global growth and rising tariffs, which can impact exports and investment.
- Managing inflation and fiscal policy is crucial for maintaining a stable economic environment, with a focus on strengthening domestic demand, infrastructure development, and promoting robust services exports.
- To boost the manufacturing sector, India must support domestic production through initiatives like Make in India and the Production Linked Incentive (PLI) scheme, foster a more business-friendly environment, and make investments in research and development (R&D).
- The startup ecosystem, technology investments, and education and skills training are crucial for India to become a leading global tech and innovation hub.
- To achieve inclusive growth, India must address employment disparities and persistent gender gaps in employment, and focus on polices that support stable but high unemployment rates and increase real incomes and purchasing power.
- To support infrastructure development, India needs more investment to support growth and attract investment, which can be achieved through robust services exports, especially in pharmaceuticals and electronics, and leveraging sectors with high growth potential.
- India's manufacturing sector, a key component of the industry, is lagging behind Japan, a potentially significant challenge in striving to become a top-tier economy.
- Overreliance on per capita income alone, as an indicator of economic strength, could lead to complacency, given that India's per capita GDP remains significantly lower than that of Japan, according to Claude Smadja.
- Leveraging big data, a strategic asset due to widespread internet access and the national identity card system, could propel India into the forefront of global tech and innovation, but it also brings the risk of vulnerability to external entities seeking to access this data.
- To truly reap the benefits of its economic rise, India must focus on addressing key challenges such as global economic uncertainty, inflation, employment disparities, and infrastructure gaps, and implement strategies for growth and innovation in the manufacturing sector, the technology sector, and rural development.
