India unstoppable, but Nobel winner warns of a shock

Michael Spence, the Nobel Prize-winning economist, recently visited India to launch the Iron Pillar Initiative in Global Learning at Ashoka University. In an interview with Sruthijith KK, Spence discussed India's evolution, its economic growth, and the challenges it faces.

Spence believes that India is a rapidly rising middle-income country, with the highest potential growth rate among major economies. He notes that India has made significant progress in both physical and digital infrastructure, particularly in the area of digital finance. India's biometric identification system and Unified Payments Interface (UPI) are among the best in the world, providing essential services to its citizens.

However, Spence acknowledges that India still faces infrastructure challenges, particularly in traffic management. He emphasizes that the development of India's economy cannot solely rely on manufacturing for export, as China has experienced. Instead, he stresses the importance of creating employment engines that draw people into the modernizing part of the economy.

Spence highlights the fact that India's per capita income remains relatively low, at around $2,800, compared to China's $14,000 and the United States' $95,000. He suggests that increasing domestic aggregate demand, mainly through consumption and investment, is a promising starting point for India's economic growth.