The global economy is creeping along at its slowest pace since the 2008-09 financial crisis – 3.1 percent. The sluggishness may be caused in large part by fear and uncertainty. One big unknown is Britain’s exit from the European Union. Another is the dark mood cast over America’s future by its presidential election. In Japan, economic reform appears stalled. And then there is China, where investors worry about Beijing’s aggression toward neighboring countries and its ability to fix a slowing economy.
Amid this gloom, however, the International Monetary Fund cites a “bright spot.” India has become the world’s fastest-growing major economy, clipping along at a 7.5 percent annual rate. And it could keep that pace for the next three years, predicts the World Bank. In addition, India ranks highest in proposed foreign investments in new projects, beating out China.
Unlike other major economies, including Brazil, Turkey, and Russia, India enjoys a great deal of peace and certainty. It is even being touted as a growth model, notable for being a stable democracy that elected a prime minister promising both economic openness to the world and a focus on reducing poverty.
Since taking office two years ago, Prime Minister Narendra Modi and his Hindu nationalist party have led the strongest liberalization of the Indian economy since 1991. Mr. Modi is tapping into the country’s large crop of skilled engineers, a rapid rise in digital devices, and favorable financial stability. Despite a strong political opposition, he has achieved a number of reforms to make it easier to do business in India and to tackle poverty, especially for girls.
India still needs far more reforms to reduce income inequality, rehabilitate its state-controlled enterprises, and improve its tax system. Even with one of the world’s largest urban and middle-class populations, seven out of 10 Indians still live in agrarian villages.
Very few countries are now providing solutions to the global problem of slow growth. For all its domestic woes, India provides a few templates for progress. The big ones are tranquility and transparency for investors.