The Indian rodeo

Developing economies typically have greater scope for growth than their developed counterparts.

This shouldn’t be too surprising: developed economies have already gone through various seismic shifts to reach a relatively optimised state, so they’re closer to the upper limit of what’s possible. In contrast, developing countries are yet to undergo certain shifts (such as large-scale mechanisation of agriculture, say) that would have a huge impact on GDP and investor returns.

Think of it this way: a month-long growth spurt when you’re 10 years old could make you taller by a foot, but once you’re 18, you’d be lucky to add even an inch to your height.

Now, although the developing phase for a nation presents extraordinary opportunities, it’s also marked by inherent growth volatility. This is because the seismic shifts that emerging markets go through involve complex structural changes, infrastructure development, and policy overhauls.

No one can tell which countries will successfully navigate such challenging transitions. These transitional phases are typically marked by high volatility and relative instability in national growth trajectories — yes, there’s greater room for expansion, but also a relatively high chance of crashing or stagnating.

In other words, developing countries are more vulnerable to external and internal shocks.

However, India’s economic journey has managed to defy certain norms of this developmental curve, as can be seen below.

Over the past four decades, the country has demonstrated a consistent growth trajectory while keeping volatility in check — a characteristic more commonly associated with advanced economies.

For the periods 2011-2019 and 2020-2023, India’s average 5-year CAGR for nominal GDP was higher than that of the other developing countries represented above. At the same time, the volatility of this metric was lower for India than for those other countries.

The decadal growth levels for India might appear chaotic, but they’re actually rather consistent: they highlight the effect of compounding and are indicative of steady growth.

For more actionable insights backed by data and analyses, we invite you to read the latest edition of Netra in its entirety.