Navigating Risks for Growth

To sustain rapid economic growth over the medium term, policymakers might need to take some well-calculated risks

- NEELKANTH MISHRA

IN ASPIRING TO be a developed country by 2047, India is trying to achieve in less than 60 years what took most of the current set of advanced economies three to four times as long. That means average growth needs to be three to four times the pace at which those economies grew as they progressed to prosperity. Exact replication of social and economic choices made by them would be unwise, as they made mistakes, too, and in any case, the economic environment today is different.

Let us start with the tailwinds. First, the further away one is from the technology frontier, the easier it is to grow rapidly initially. For example, in the US, the transition from no telephony to 4G data occurred over more than a hundred years. In India, in less than a decade, rural areas went from having less than 10% of people having landline phones to 60% having 4G data. At a broad level this meant a century of productivity growth getting squeezed into a decade (some of it might still be playing out).

Not all useful technologies can be spread at scale at this pace, but the world today is much more interconnected than it ever was, easing transmission. The cost of shipping goods has fallen dramatically, particularly due to containerisation; the cost of moving people by air is down nearly 90% in real terms over the past half century; and the cost of transferring information and expertise has fallen much faster than that. It is therefore easier to ship goods, people and ideas; our priority should be to open up to accept these. Over time, we must also become a 'product nation' (learn to innovate and build our own brands) to not get caught in the middle-income trap.