Grooming India’s trillion-dollar states

India is likely to cross the US$ 5 trillion GDP mark by FY 2028. Many of its 36 states and union territories are also embarking on fast-paced growth paths.

Can India achieve its goal of being a developed country by 2047? It is a steep uphill journey when one looks at the current state of the world economy. To become a developed country, Indians should have a per capita income of US$ 13,000 from the current US$ 2700. This growth can only be achieved if India’s GDP consistently grows 7-8% per annum over the next 23 years to 2047.

 Two things are important here. One is to sustain the high growth momentum, even during terms of external shocks like recession in the global market. A well-balanced domestic market and export-led growth path can help derisk this path. The second is to have a sound transformation strategy for India’s states which legacy governance issues have marred.

 Steady growth of domestic purchasing power capacity is important. The government is widening its social net to cushion the vulnerable through income guarantees and healthcare insurance programmes. An area that needs to be addressed is volatility in agricultural incomes and food price inflation. Technology is also transforming governance. The India Stack as it is popularly known is a set of open APIs and digital public goods that aim to unlock the economic primitives of identity, data, and payments at a population scale. Although the name of this project bears the word India, the vision of India Stack is not limited to one country; it can be applied to any nation, be it a developed one or an emerging one.

The deployment of these technologies today makes the nation a world leader in digital payments. The Pradhan Matri Jan Arogya Yojana is also powered by the India Stack and is the world’s largest publicly funded health insurance cover.

 India has made massive investments in infrastructure too. A developed country should ideally remove all bottlenecks in the transport of both people and goods. India’s road network which measures 6.3 million kilometres is the second largest in the world. It paves approximately 35 kilometres of highways a day. It is also building dozens of airports and laying new high-speed railway lines. India will also have a deep seaport at Vizhinjam to service mother vessels by 2025.

 But this is half the story. To realize its development goals, India’s states should also work in tandem with the federal government. India has 788 members across two houses in the Parliament and 4036 legislators spread across its states. No party has ever held a majority in all of them in the last three decades. Political opinions do matter in this transformation.

 Luckily today, India’s politicians from across the spectrum are sold on the vision. Eight states have already endorsed US$ 1 trillion GSDP plans. Maharashtra, Karnataka and Gujarat would be the first ones to hit that goal in the second half of 2030s. Tamil Nadu and Uttar Pradesh are also in line to follow them. Some of these states have set the goal within this decade. They are looking for foreign investment to boost manufacturing and exports to accomplish this fast growth. What will also matter is the rate of growth of large state economies like West Bengal and Punjab and resource-rich areas like Jharkhand and Chhattisgarh. Fast-growing states like Telangana and Andhra Pradesh are also pitching in with trillion-dollar visions of their own.

 It is not easy to be a trillion-dollar economy. Only 19 countries today have economies of that size. India is also incentivizing manufacturing to transform the composition of its trade basket. High-tech areas like electronics and smartphones are witnessing fast-paced growth through the government’s incentive programmes. These incentives known as the Performance-Led Incentives Scheme have led to US$ 13 billion in fresh investments in manufacturing capacity and generated employment for over 650,000 people.

 The world economy is still not out of the woods. But India is raring to go. There is a consensus across political parties to move quickly. A lot will also depend on the outcome of India’s two-month-long national elections set to conclude by the first week of June.

But India’s growth will be a major inspiration for many other countries. No democratic country would have grown this fast without colonies, violence and infringing upon other people’s rights. In those aspects, India is scripting a unique growth story.

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