India, and foreign perceptions of India, have changed dramatically over the past decade. India’s IT sector came to the attention of the rest of the world in the runup to the 21st century, as concerns about Y2K led foreign firms to take advantage of a skilled, but cheap, work force in India, which until then had passed most by.
But once these links were established, they spread. Indian IT companies started to offer other services, spreading into a range of back-office functions. And India’s other highly skilled sectors, such as pharmaceuticals and biotechnology, increasingly moved to global prominence. India’s pharmaceutical industry is now a major provider of drugs to Africa.
As India gradually increased its growth momentum, so a new class of consumers came into existence, boosting India’s manufacturing sector. Indians who had ridden bicycles started demanding scooters. Those who had ridden scooters wanted cars. As production increased, so foreign firms started integrating India into their supply-chains — at first, often as a source of production, but mostly with one eye clearly on the emerging domestic market.
Rather than suffering a brain drain, many Indians who had lived overseas started to return, spotting increased business opportunities within India. And with them came foreign investment. In the 1990s, India received foreign direct investment averaging around $2 billion a year. In 2007 this figure stood at $35 billion, and in 2008 a record $46.5 billion of foreign funds flowed into India. Foreign investors are also looking further afield. Rather than concentrating on the metropolises — Delhi, Mumbai, Chennai, Bangalore and Kolkata — the so-called “second-tier” cities are receiving increasing attention.
With economic growth came increased self-confidence and the sense that India’s economy should become a source of pride. Of course, challenges remain, but the fact that governments now talk of issues such as infrastructure as opportunities, rather than challenges, highlights a changing mindset. And India’s voters increasingly support those politicians that improve service delivery, particularly of social and physical infrastructure.
Increasing value for India’s agricultural sector is a major priority. The majority of India’s population still relies, directly or indirectly, on agriculture for their livelihoods. Another challenge is energy. If India is to sustain its growth momentum, it will need more energy. India is making progress in developing renewable energy sources, but will require major investments if it is to increase its energy output.
But perhaps the single-most important development is the rising demand for education. In the past, many poor Indians believed that their children were more useful earning extra money than attending school. Rising economic opportunities have increased the potential for social mobility and education presents an opportunity for children to lead a better life. In the early 1990s, just over 80 percent of Indians went to primary school. That figure is now thought to be around 95 percent.
Education epitomizes the entrepreneurship of India. As demand for education increased, so did its supply. And the quality has also improved. In turn, the government has encouraged this progress, not least with a mid-day meal scheme, which encourages parents to send their children to school. In education, as in many sectors, challenges remain. Preventing students from dropping out is difficult. However, the rise in demand for work-related courses, such as in IT, demonstrates that change is under way. As India moves closer toward a virtuous circle — better levels of education, leading to better economic opportunities creating more wealth — so India will become a country that is harder for the rest of the world to ignore.
India is proud of its domestic achievements; of the fact that domestic demand underpins its economy and of the fact that its scientists can compete with the finest in the world. But although savings have increased, India needs massive investment, and foreign investment will be required to upgrade infrastructure, particularly in rural India.
