Column by the President of Hitachi Research Institute, Mizoguchi
I recently traveled to Delhi and Bengaluru in India. To prepare for my trip, I set myself to an Indian mood by watching the Indian movies RRR and The White Tiger. India produces more than 1,900 movies a year, greatly surpassing China (around 800) and the U.S. (around 600), which is also somehow emblematic of India's upward trajectory on the world stage. RRR is utterly entertaining while The White Tiger draws attention to social issues. The breadth of themes tackled by the cinema industry reflects the diversity of India. Seeing the audience dancing and cheering while watching RRR in a Japanese movie theater, I could feel the strength of India’s power extending beyond national borders.
The Indian economy is thriving. Its real GDP growth rate in the January-March quarter of 2023 was 6.1% year-on-year, and 7.8% in the April-June quarter, with the annual growth rate expected to be more than 6%. India, which has the largest population in the world, surpassing China, is enjoying a demographic dividend. The median age in 2023 (the age at the midpoint dividing the total population arranged in ascending order by age into two equal parts) is 49 years old for Japan, 38 years old for the U.S., and 39 years old for China, while that for India is 28 years old. By 2030, the median age will be 52 years old in Japan, 40 years old in the U.S., 43 years old in China, and 31 years old in India. Unlike Japan and China, where the population is aging rapidly, India will maintain a substantial young workforce. India is already the fifth largest economy in the world, surpassing the UK, and it is projected to become the third largest economy in the world by 2027, outperforming Japan and Germany. By 2050, it could be on par with the U.S.
The Modi administration, which came into power in 2014, has set “Digital India” as a key policy, promoting the provision of digital infrastructure including rural areas, digitalization of administrative services, and digital empowerment of citizens. As a result, its social media usage and digital payments per user are now the highest in the world. Indian IT engineers are indispensable to the development and operation of IT systems around the world, and no one is surprised that many of the CEOs of American IT companies—from major companies to startups—are Indian. Open innovations architecture of so called “India Stack” (national ID, digital payments) is getting attention among countries globally. However, the other key policy, “Make in India,” has not been successful. The plan was to increase the contribution of the manufacturing sector to India's GDP to 25% by 2022 (later revised to 2025) and create 100 million additional jobs, but the share of manufacturing still remains at about 17%. To remedy this situation, the Modi administration has introduced a production-linked incentive (PLI) in 2020 to spark growth in the manufacturing industry.
India was the first foreign country I visited back when I was a student more than 30 years ago. I got my first passport and wandered through India as a backpacker. At the time, the roads in Delhi were completely unpaved, and it was impossible to go a day without stepping on cow manure. I remembered how the Ganges River in Varanasi looked exceptionally clean under the morning sun, and how a boy I met in Kolkata (formerly Calcutta) was thrilled to receive a used towel from Japan. Today, Delhi is one of the largest cities in the world, and stray cattles are rarely seen in its streets. Its air quality index (AQI) is critically high at more than 150, rising to several hundreds in winter. Bengaluru is now lined with offices of world-leading IT companies and luxury brand stores. But the power of chaos in India has not changed at all. Despite having clear lanes on the paved roads, no cars are driving along the lanes. This is something you would not see in Japan. Quiet Indians are as rare as noisy Japanese at international conferences.
India is also now at the center of world politics. India eventually withdrew from the RCEP, has not joined the TPP, and basically does not intend to participate in multilateral trade agreements. While it is working with the U.S. and other countries in QUAD, it has abstained from signing a UN resolution condemning Russia's invasion of Ukraine. Despite having border issues with China, it cooperates with China through the BRICS and participates in AIIB as a founding member. It has assumed presidency of the G20 Forum and recognizes itself as the representative of the Global South. Located at the center of the world's balance of power, it holds the casting vote for geopolitical change. However, maintaining the stability of this huge nation is not easy. The BJP, the ruling political party, advocates Hindu supremacy and gathers support from Hindus, who account for about 80% of the population, but conflicts with other religions persist. Security tensions may also increase as China expands its engagements in the Indian Ocean. Protectionist trade policies, complex labor and land acquisition laws, and fiscal deficits can hamper growth in the manufacturing industry. However, despite a host of issues in diplomacy and the economy, the level of enthusiasm for solving them is high. I hope that India will continue to derive energy from all these chaos and aim for a finale where everyone dances happily like in Indian movies.
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