The Largest Economy in the Making

Bharat is set to be the world's biggest growth story and investment opportunity for the coming generation

- BY HARSH GUPTA MADHUSUDAN

UTTAR PRADESH AND Bihar-one of the most fertile regions in the world together will soon have the population of the US and Canada combined. But the income per person is an astonishing 100 times less for UP/Bihar compared to the US/Canada despite India's relatively fast growth over the last few decades! For all of India compared to the US, that per capita difference is around 30x (or 8x if you adjust for cost of living; similarly, 100x for UP/Bihar becomes, say, "only" 20x after adjustment).

These would be mind-boggling numbers even for as late as the 18th century. For development theoreticians, economic historians as well as practitioners across policy and business-such massive wealth disparities across regions have been a source of great curiosity and debate. Because to understand if there is a convergence ahead for China/India/Africa with the West/Japan, we need to first understand what caused this massive divergence which has been historically otherwise absent.

A related macro-historical debate has been the huge rise in living standards across the world, especially over the last one or two centuries. After all, the "great divergence" was more because of the 'West'taking off by an order of magnitude even though large parts of the 'Rest' were impoverished because of colonialism, slavery and famines-India and Africa most notably. So, the second big question now is even if the world convergences to not so dissimilar standards of living, what happens to overall growth even if a few countries remain the "frontier" for innovation?

These two questions-"convergence" and "cornucopia", let us say a bit extravagantly-will in large part define the rest of this century.