US-India Global Review

59 US-INDIA GLOBAL REVIEW JANUARY-MARCH 2018 growing major economy in the world, an unexpected and notable feat, even if it owes more to the slowing of China than to its own acceleration.6 Public anger over corruption and failed government services has risen, so the public mood in India today is far from triumphant. Although India’s position in the world has been transformed beyond recognition in the past 25 years, much reform is still needed, above all reforms in governance, institutions, and the delivery of government services. The Main Successes over the Past 25 Years India was in such poor shape before 1991 that it takes an effort to recall how bad things were. Some of the biggest changes since then are described below. Until 1991 many superpowers (notably the United States) equat- ed India with Pakistan in foreign affairs, even though Pakistan had barely one-eighth of India’s popu- lation. India’s slow-growing, inward-looking socialism made it unimportant in global terms, save as an aid recipient. Pakistan’s mili- tary ties with the United States made that country seem a more important global player. But today, the United States views India as a potential superpower. President George W. Bush backed India’s entry into the nuclear club. President Barack Obama has backed India for a seat on the UN Security Council. The United States sees India as potentially the only country in Asia that can check a rising Chinese juggernaut in the 21st century. And Newsweek has called India a “potential superpower.”7 Once a poor economic laggard, India now has the third-largest GDP ($7.98 trillion) in the world in purchasing power parity terms after China and the United States (Table 1) Per capita income is up from $375 per year in 1991 to $1,700 today. India has long ceased to be a low-income country as defined by the World Bank, which uses a threshold of $1,045, and has become a middle-income country. India’s annual GDP growth rose from 3.5 percent in 1950-80 and 5.5 percent in 1980-92 to an aver- age of 8 percent since 2003, with a peak exceeding 9 percent in the three years 2005-8 (see Table 2). The International Monetary Fund estimates India’s GDP growth at 7.3 percent in 2015 and 7.5 per- cent in 2016, faster than China’s rates (6.9 percent and 6.5 per- cent, respectively). In a depressed global economy, the IMF sees the United States and India as the two bright spots, as the two major economies holding up an other- wise slowing world. Before 1991 India was derisive- ly called a bottomless pit for for- eign aid. Every few years, a food crisis or foreign exchange crisis would send Indian ambassadors and politicians scurrying around the world, asking like Oliver Twist for more. Today, aid has not van- ished but has become irrelevant to the balance of payments or invest- ment plans. Gross aid flows exceed $5 billion, but after debt servicing, the net inflow is barely $0.5 billion. An unexpected new develop- ment has been the rise of India’s own aid to developing countries (though some would call it quasi- commercial loans to sell Indian equipment). India’s net aid giving is now well over $1 billion per year, with Bhutan ($813 million) Table 1. Five Biggest Countries in Purchasing Power Parity GDP, 2015 ($ trillion) Source: World Bank, World Development Indicators database, July 1, 2016, China United States India Japan Germany 19.52 17.95 7.98 4.74 3.85 Table 2. Annual Growth of GDP Source: Author’s calculations from tables of the Government of India’s Economic Survey, various years. 1950-80 1980-92 1992-2003 2003-15 3.5% 5.5% 6.0% 8.0%