India is quietly doing great

Noah Smith argues that India is in a strong phase of development because its task is simpler than China’s future ambitions. In his view, India mainly needs to leave poverty behind and reach upper middle income status, and it has already made substantial progress in poverty reduction, inequality, growth, and infrastructure.

Reading notes

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• India’s current challenge is to escape poverty and become an upper middle income country.
• India is around where China was in the late 2000s in GDP and Human Development Index terms.
• Extreme poverty in India has mostly been conquered over the last two decades.
• India reduced poverty while also reducing inequality.
• The World Bank attributes poverty reduction mainly to economic growth and redistribution, especially strong consumption growth, rising employment among women, and expanded social transfers.
• India has been growing faster than China since the pandemic.
• India’s current growth rate is described as healthy, with room for living standards to keep rising quickly.
• Noah Smith is skeptical that fiscal probity and structural reform alone explain the growth boom.
• Government investment has increased sharply since before the pandemic.
• India has been building highways, railways, and bullet trains, which should help manufacturing and consumption.
• Manufacturing growth is now broad-based and is rising alongside services.
• Electronics and car production are growing strongly, and India’s engineering exports are diversified across several product categories.
• India’s growth still faces limits, including low private investment, weak FDI, poor rural education, female underemployment, and incomplete urbanization.