Thirty-five years after its landmark 1991 economic reforms, India's journey towards deeper global integration continues to be a work in progress, according to a recent data-driven analysis by investor Shankar Sharma. While the country has significantly improved its global standing, the pace of this integration has been notably gradual.
Sharma's analysis, shared on X, highlights that India's Global Composite Index ranking has moved from the 50th percentile in 1991 to the 62nd percentile by 2024. This indicates a positive shift in its relative position among global economies, but Sharma characterized the rate of improvement as "glacial," with an estimated seven years required to advance by just one percentile point at the current trajectory.
Measuring Global Standing: A Percentile Approach
To assess India's post-1991 economic trajectory, Sharma's framework utilizes global percentile rankings rather than absolute figures. This methodology allows for a comparative evaluation against other nations, offering a clearer picture of India's relative progress.
The comprehensive analysis is structured around four key pillars: economic prosperity, productive capability, external resilience, and manufacturing. These pillars provide a granular view of where India has made strides and where challenges persist.
Uneven Gains Across Key Pillars
The data reveals a mixed bag of progress across the four pillars:
- External Resilience: This pillar saw the most significant relative improvement, with India's percentile ranking climbing from 94 in 1991 to 98 in 2024. This measure encompasses critical indicators such as energy import dependency, foreign exchange reserves, and foreign direct investment, reflecting a stronger buffer against external shocks.
- Economic Prosperity: India's ranking here rose from 64 in 1991 to 75 in 2024. This pillar considers factors like GDP per capita, labor productivity, and consumption, indicating overall improved living standards and economic output.
- Productive Capability: Progress in this area has been limited, with the ranking moving only slightly from 45 in 1991 to 42 in 2024. This pillar evaluates merchandise exports, economic complexity, and productivity, suggesting that India's ability to produce and export complex goods still lags behind many global competitors.
- Manufacturing: While showing a positive trend, the manufacturing sector's percentile ranking increased from a low of 14 in 1991 to 27 in 2024. This indicates substantial growth but also highlights that manufacturing remains an area where India has significant ground to cover to achieve global competitiveness.
Domestic Strength vs. Global Competitiveness
Sharma's analysis suggests that India's vast domestic market, while a significant strength, may also contribute to an inward-looking bias. A strong internal consumption base can support growth but might reduce the urgency for businesses and policymakers to aggressively pursue international market competitiveness.
This dynamic is particularly evident in India's trade performance. Despite developing globally competitive capabilities in services, pharmaceuticals, and technology, India's merchandise export position remains comparatively modest. The analysis tracks indicators such as global export market share and manufactured goods exports to illustrate this point.
In conclusion, Sharma's broader message is not that the 1991 liberalisation reforms failed, but rather that their benefits have been unevenly distributed, and the relative pace of global integration has been slow. Achieving deeper global integration will necessitate continued focus and progress in key areas like exports, manufacturing, productivity, and overall economic complexity.