Exactly 30 years ago in 1991, India started economic reforms to save itself from an economic collapse. Decades of socialistic policies had led to an uncompetitive economy. No foreign reserves were left for critical imports. It had to mortgage its gold for an IMF bailout. But 1991 turned out to be a watershed moment for India. The next 30 years brought unprecedented growth and wealth.
We don't realise how well India has done in these 30 years. If we discount the 10% GDP decline in 2020, India's GDP/capita increased every year in this 30-year period.
India's GDP/capita was a lowly $303 in 1991, down from $368 in 1990. This decline happened because the government depreciated the Indian rupee against the USD in 1991 to make the economy competitive.
Its GDP/capita increased to an all-time high of $2,101 in 2019 before coming down in 2020.
In this 29-year period between 1991 and 2019, India's GDP/capita grew by an average of 6.9% every year, and the country became 7x richer.
But how does this golden age of the Indian economy compare with the similar 30-year periods of other big economies?
China started its economic reforms in 1978, 13 years before India. China's GDP/capita was $156, much lower than $206 of India, in 1978. China grew at a scarcely believable rate of 10% every year. It became 17x richer in this 30-year period as compared to India's 7x.
China is an exception. No other big economy has ever grown at this rate in history. There have been at least 2 other instances of sustained high-growth by big economies.
Japan was on its way to overcoming America before its economic decline in 1996. Germany had an unnatural 30-year growth before the Eurozone crisis brought its economy to a halt in 2012. Interestingly, both these countries were much richer than China and India when they embarked on their high-growth journey.
Japan's GDP/capita was $5,198 in 1976 while Germany's was $5,069 in 1982, both much higher than India's $2,101 in 2019. But their annual growth rates over the next 30 years are similar to that of India.
So, all is not lost for India.
1. India has grown rapidly over the past 30 years since it started economic reforms. Its growth fades only in comparison with China which is a turbocharged beast. Otherwise, India's growth is comparable to periods of sustained growth by other big economies.
2. Both Japan and Germany have shown that its possible to grow rapidly over long periods from a much higher base than India's current one.
There is nothing to stop India from growing rapidly over the next 30 years as long as the government doesn't create policies to discourage it. As the popular saying goes, China grows because of its government while India grows despite its government.
India's destiny is in its hands, and history is on its side. All the country needs is a half-decent government with few right policies.
*All these numbers are comparable because they are adjusted for inflation.