For many years, economists, investors and pundits have been extolling the so-called BRIC nations -- Brazil, Russia, India and China -- as emerging powers destined to dominate the global economy. With their huge and growing middle classes, the potential for consumption invites visions of profitable investments and sale of consumer products. But today Brazil is beset by weak growth and political scandals, Russia has taken itself into virtual economic isolation and even China is finally slowing down. Of the four BRIC nations, only India seems to still hold the promise of being a potential engine of global growth.
India's gross domestic product in the last two quarters of 2014 surged to 8.2 percent and 7.5 percent, better than China's which sank to its weakest performance in almost a quarter century. In the current fiscal year, India's government expects its GDP to grow 7.4 percent, faster than China's.
India's vast population within a few years will exceed China's. It looks especially promising today because of the business-friendly policies of new Prime Minister Narendra Modi. Small factories no longer need to shut down every year for government employees to inspect boilers. Foreign investment rules have been relaxed for insurers, military contractors and real estate companies. A major tax overhaul is underway. The Indian stock market is surging, as is the rupee. What's not to like?
But before you book your flight for Mumbai, a few words of caution are in order. India has been poised for liftoff a long time but can never quite seem to get off the launch pad. India's GDP is about a fifth of China's and the World Bank says nearly one out of four Indians remains trapped in absolute poverty, compared with only about 6 percent of the Chinese.
No one who has spent much time in India as I have done would wonder why its economy remains so sluggish. The Indian bureaucracy is a major obstacle to every attempt to launch new enterprises, build new structures or modernize transportation. In China, once a decision is made to embark on development projects, opposition is swept away. Not so in democratic India where activist citizens can and do fight development tooth and nail.
But Modi is fully aware of that problem and many other issues that impede India's economic development. He is determined to move India into the world economy as quickly as he can. He has been criticized for the apparent timidity of his agenda, proposing a series of incremental steps instead of a vision of dramatic change, but Prime Minister Modi is not Chinese Premier Li Keqiang and India is not China. But his reform agenda is advancing and the opposition is beginning to warm to his tax overhaul proposals, privatization of mining, investments in manufacturing and insurance reform that will allow more foreign investment. And it is clear Modi is investing substantial energy into executive orders to reform the bureaucracy and government operations of India. It will take time for India to enact major reforms, but the Indian people are intelligent, resourceful and determined, and they have progressive leadership. Every U.S. corporation that aspires to a world footprint must have a presence in India.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. March 2015