india -indian economy
India is an increasingly important trading partner for Germany. 
Baerbock’s trip there a month ago shows that. But what’s really going on in the huge, expanding market?

A recently published analysis by the US investment bank Morgan Stanley ” India’s Impending Economic Boom ” (The coming economic boom in India) was enthusiastically received on the subcontinent – especially by the US-oriented business elite. The Times of India, for example, reports with great excitement that more than a doubling of India’s gross national income (GNI) from the current 3.5 to 7.5 trillion US dollars is possible within this decade. That would make India the third largest economy in the world – after the US and China and ahead of Japan and Germany.

However, the Indian economy would have to continue growing uninterruptedly at least at the current rapid pace (6.9 percent) . In the last ten years, economic growth has averaged – still very solid – 5.5 percent.

For your orientation: Expressed in US dollars (which says only relatively little about the real purchasing power ratios), the USA generated over 21 trillion US dollars in 2020, China over 14.5, Japan over five and Germany just under four trillion US dollars. Great Britain and France followed. India was still in 7th place with 2.64 trillion US dollars . This year, however, the Indian economy has “overtaken” France and the UK and is now 5th in the global ranking .

Relative prosperity for a few

According to Morgan Stanley forecasts, India’s per capita income is also expected to more than double – from the current 2,278 to 5,242 US dollars in 2031. (The average income in Germany in 2021 was 44,828 euros.) disposable income should, according to the investment bankers, trigger a kind of consumer frenzy.

The number of households with more than US$35,000 a year could increase fivefold to over 25 million in the next ten years. Such relative prosperity would (depending on the definition and social development) affect around 125 to 150 million people – roughly ten percent of the almost 1.4 billion Indians.

Of course, the bankers praise the neoliberal agenda of Narendra Modi’s Hindu nationalist government: India is on the way to becoming the “factory of the world” as the government has cut corporate taxes, encouraged investment and poured money into the country to improve infrastructure take hand All of this is likely to boost private investment in industry and processing.

In addition, multinational companies welcomed the new investment prospects in India, and the government provided not only infrastructure but also land to build industrial plants.

Industrial expansion?

However, even Indian corporations – such as Tata Motors – have had to experience that industrial expansion on the densely populated subcontinent can be problematic. The Indian giant has tried in vain to set up a factory for the small car “Nano” in the state of West Bengal .

Nevertheless, Morgan Stanley assumes that the share of manufactured goods in India’s national income could increase from the current 15.6 to 21 percent by 2031.

But that sounds a lot grander than it is on the one hand and would, above all, assume a much-needed trend reversal on the other. Because before the banking crisis in 2008, manufacturing accounted for almost 19 percent of GNI and has since declined significantly.

The US bankers also fail to mention that political imponderables play a key role here. It remains to be seen to what extent the West is actually willing to decouple itself economically from China and to produce and buy in India. And human rights violations, such as Foxconn are being accused of in Chennai, will certainly remain unpleasant side effects of this (desired) fast-track industrialization for the foreseeable future.

Nevertheless, the expansion of domestic industrial production is urgently needed from Delhi’s perspective, because 58 percent of all Indians still make a living from agriculture. However, the word “agriculture” is not even to be found in the summary of the Morgan Stanley report.

From outsourcing to the biometric central register

It is interesting to see which individual economic aspects the bankers particularly emphasize. They point out, for example, that the number of Indians taking on work in outsourced production processes from other countries will double to at least eleven million in the next decade. At the same time, the expenses for such outsourced activities are expected to increase worldwide from 180 billion to over 500 billion US dollars.

Online trade is also expected to double its volume by 2031 and then account for 12.3 percent of all trade. Today, 250 million people shop online on the subcontinent, by 2031 it is expected to be 700 million. At the same time, the number of Internet users is expected to increase from today’s 650 to 960 million people – that would mean that around two thirds of Indians would be online.

The controversial Aadhaar system – a biometric central register in which 1.3 billion Indians have now been recorded with their data – is praised by the analysts at Morgan Stanley as the basis for “simple and inexpensive financial transactions”. About 4.5 billion payment transactions with a turnover of around three billion US dollars are now to be processed monthly via the system. This includes more than $15 million in tolls per day.

Growth that inspires?

Investment bankers are most excited about the economic growth they forecast. Since India is the only country in the world that will have annual growth of more than 400 billion US dollars from 2023 and more than 500 billion from 2028, the Indian economy must become the focus of investors’ attention.

However, looking at the physical side of these forecasts is probably hard to suppress a certain uneasiness: India will account for a quarter of the growth in car sales , and by 2030 30 percent of all passenger vehicles are projected to be electric. By then, energy consumption will increase by around 60 percent, which will require investments of over 700 billion US dollars.

All of India’s more than 600,000 villages now have access to the power grid. But the challenges on the way to a modern – let alone inclusive – infrastructure are considerable , as Standard & Poor writes.

Incidentally, three quarters of the electricity in India currently comes from coal and around 20 percent from renewable energies (as of 2021). The environmental problems on the subcontinent are still enormous. Telepolis has repeatedly reported about it .

Big hurdles

The study by the US bankers also points to the “significant effects” that the expected economic growth is likely to have on demand in the housing market and for commercial real estate. This prospect, on the other hand, will certainly give most Indians sleepless nights.

Because the situation, especially in the extremely densely populated cities, is already frightening today. In Greater Delhi , land prices have increased by 10 percent and residential property prices by 20 percent from mid – 2021 to mid – 2022 . Since 2019, land prices in India have increased between 30 and 40 percent .

Morgan Stanley almost entirely omits social development issues. The report only mentions that the proportion of users in the healthcare system could increase from 30 to 40 percent today to 60 to 70 percent in the next ten years. Aspects such as poverty reduction are missing. The economically relevant fact that India has the greatest disparity in pay between men and women in all of Asia also has no place in the considerations of the investment bankers.

If current trends continue, India could become the world’s third largest economy in the next decade. However, the fact that the US bankers’ forecasts come true in full must currently be considered overly optimistic.


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