13 August 2007
Sixty years after independence, India has finally entered a virtuous circle of long-term economic growth, with strong fundamentals and a booming young population, forcing the world to sit up and take notice.
After decades of being shackled by the so-called 'Hindu rate of growth' well below five per cent the Indian economy has soared at an average rate of over seven per cent every year in the last decade and at around nine per cent in the past three years.
"We expect the economy to grow at around nine per cent in 2007-08 as well, while inflation is expected to be around four percent," says C Rangarajan, chairman of Prime Minister Manmohan Singh's high-profile Economic Advisory Council.
As more and more people shift from agriculture to manufacturing and services sectors and move from villages to towns, economists expect the rate of growth to go up by a couple of percentage points over the next decade. This growth is fuelled by several factors. At over $20 billion per annum, India receives more inward remittances than any other country from the 25 million people of Indian origin and non-resident Indians living abroad.
The boom in the information technology (IT) and IT-enabled services (ITES) has seen India become the back office of the world for vital functions that range from school homework guidance to telemarketing and airline booking services. The Indian IT-ITES industry notched up $39.6 billion in revenues in 2006-07, up 30.7 per cent from the previous year. There is also an air of justified optimism about India's long-term economic prospects today and experts say there are at least three reasons for this.
First, savings and investment rates are rising and are presently at around 32-34 per cent of India's gross domestic product (GDP). Analysts believe they may rise to 37-40 per cent of the GDP by 2013. Second, India is now in a demographic situation where a significant part of its 1.17 billion population is a youthful asset. Ancient India is today home to the largest percentage of youngest population in the world with more youth below 25 years of age than any other nation.