As Delhi Hosts G20, The India AKA Bharat Story Is Shaping Up To Be The World's Biggest

Giant ships do not change directions quickly hence very frequent updates make little sense. But this is as important a moment as any to undertake such a exercise.

There are many ways to slice and dice, but I divide the India story into three overlapping buckets that together create a virtuous cycle:

Scale, Innovation, Democracy.

(1) Scale and demographics leads to innovation as more talent stays/comes back (unlike for smaller EMs).

(2) Innovation leads to more economic growth and tax revenues, which in turn strengthens a market democracy and the social contract.

(3) Democracy ensures that scale is maintained thanks to unity in diversity, while making geoeconomics easier.

A place where they all three converge in the form of a concrete example to begin with is how many top engineers and equivalent young Indian talent are either staying back in, or returning to, India.

Sandipan Deb recently wrote a column “Bullish on India - Why more IIT and MBA grads are returning to work in India”. Another piece says about a third of India’s top engineering talent leaves: which is much lower than earlier. A piece from 2017 said that an astonishing 84% of IIT Bombay alumni (who graduated after 2000) have stayed back in the country.

Now brain drain and gain are slightly overused concepts - circulation is relevant, so are misunderstood incentives, and a strong diaspora can be a huge asset - nonetheless, net or final emigration of top talent is indeed a relevant issue for many emerging markets or economies.

India at a per-capita income of $2,500, which is about 20% of the world average at market exchange rates and about 40-50% on a cost adjusted basis. However, its scale has reached a point where, as the above links show, the best and brightest are increasingly choosing to stay in India - never mind the ups and downs of startup funding cycles - and even if a substantial fraction do leave, in absolute numbers there are enough who stay back. India probably overtook China as the world’s biggest polity this year.

This stage is the result of decades of expanding, though imperfect, human capital investments within the world’s largest democracy - see below four charts below (source: World Bank.) Some leading indicators for growth are below:

India’s gross secondary school enrolment ratio has just about surpassed the global average. Quality concerns still very much exist, but that is a global phenomenon as well.

As more talent stays back, more innovation and growth happens, which in turn anchors democracy. Remember the only time democracy was briefly suspended in India was after the awful economic period of the early to mid 1970s.

Moreover, democracy is the reason we do have scale in the first place - the Indian democratic civilisational republic based on Dharma has arguably united India in a way no inflexible or unaccountable emperor could have.

Democracy also allows alternate sources of influence, financial and intellectual/cultural, in a way that no dictatorship which believes in just muscle power can. Democracy - other things being equal - allows for better political and economic ties with the world’s developed economies as they try to diversify away from China’s goods and Russia’s energy.

Finally, in India business tycoons such as Ambani, Tata, Premji and Murthy are looked up to; they are not banished to teaching jobs at foreign universities like Jack Ma was. A free press and adversarial academia continue: with blemishes, yes, but that was earlier too. Irritants remain - Indian cities, for example, are still difficult to live in though here too, things are improving. A community of expats is rapidly growing in India in the post-pandemic world, albeit from a small base.

India’s GDP and market-cap are still less than US $4 trillion, while the world GDP and market-cap are around or more than $100T respectively. This is when India has more than 1/6th of the world’s population. On just these admittedly rough metrics then, India should within a generation be ~5x (in addition to overall global growth and inflation) - as better state capacity and human capital filter through, like shown above.

A famous Bollywood line goes: picture abhi baaki hai mere dost! (the movie is just getting started!)

As a new India, proud of its ancient Bharatiya identity, rises again in material terms, the world will change in many profound ways, material and non-material. Make sure you do not miss out on the journey of a lifetime, no matter where you are.

This post was originally published on Harsha Gupta Madhusudan's Substack and has been reproduced here with permission.