When U.S. President Barack Obama arrives in Mumbai Saturday, he'll be landing in what remains one of the poorest countries in the world, with urban slums that stretch for miles and a rural landscape that remains remarkably similar to that in the days of the British Raj. For all you hear about Internet start-ups and high-tech call centers in Bangalore and Chennai, India currently accounts for just 2.25 percent of the world's GDP and 1.3 percent of its merchandise exports. It ranks 11th worldwide in absolute GDP and 161st in per capita GDP. Its economy is less than one-tenth the size of America's, but its population is more than three times as large. So why all the hype?
The United States and many other countries are betting on India not because of where it stands today, but where they see it going in the next 15 years. In real dollars, India has grown at an annual rate exceeding 12 percent during the last seven fiscal years. Even going by the conservative assumption that the country will grow 10 percent per year in real dollars over the next 15 years, it will grow from $1.3 trillion in fiscal year 2009-2010 into a $5.5 trillion economy by 2024-2025. Depending on how Japan does during these years, India would then have either the third- or fourth-largest economy in the world.
American perceptions of India are also shaped by the large number of highly successful Indians, the vast majority of them first-generation immigrants. While the presence of Indians in the United States is not new, their phenomenal success is. Over the last 15 years, their influence in the tech and finance industries and higher education has grown as that of no other single immigrant group -- Ajay Bhatt, inventor of the USB port, Vikram Pandit, CEO of Citigroup, and Indra Nooyi, CEO and chairperson of PepsiCo, are today sources inspiration across America. At any given time, there are 100,000 bright Indian students studying at U.S. universities. They promise to be a part of the highly mobile international labor force that will play a decisive role in designing tomorrow's global economy.
A final factor driving American perceptions of India is the resilience of its democracy during the 63 years of its post-independence existence. Its vast size and diversity notwithstanding, India has remained a vibrant democracy with a fiercely independent press and judiciary and growing oversight by NGOs. Its superior economic performance in recent years has also put paid to the notion that democracies are inherently incapable of the kind of miracle-level growth that South Korea and Taiwan achieved in the 1960s and 1970s and China has been clocking over the last three decades. Unlike authoritarian China, which seeks to be a rival power and has adopted an increasingly belligerent posture in the region, Indian democracy promises to be accommodating and friendly.
But none of this will matter if India fails to fulfill its economic promise. As the recent revelations about corruption and mismanagement of the Commonwealth Games dramatically showed, India's government still has a long way to go -- the country's phenomenal success over the past two decades has come largely because its politicians and bureaucrats have gotten out of the way. Fortunately, there are four powerful reasons why India will forge ahead, regardless of what happens in New Delhi.