Every so often, the occupant of 7 Racecourse Road in New Delhi declares it to be an “Indian century”. Manmohan Singh, prime minister since 2004, has not resisted the temptation. A decade into the 21st century, few would bet on the elephant managing to lumber past the dragon, or succeeding in consigning to history Chinese aspirations for a sinocentric, unipolar Asia.
Yet for the first time, political risk is now a bigger threat to India's growth story than bad economics. Like many other developing countries, post-1947 India followed an inward-looking strategy of heavy industry-biased industrialisation. This was in part a reaction to the laisser faire policies followed by the British in the 19th century. But the deep-seated opposition to liberal reforms that once characterised the nationalist elite has been waning gradually since 1991.
The days of the so-called Hindu rate of growth, when India's economy grew at barely 2-3 per cent a year for decades on end, scarcely keeping up with the unbridled increase in its population, are over. Annual growth over the past five years has averaged more than 7 per cent. The country's planners have set their sights on sustained double-digit expansion in the medium term – a credible goal if the country's yawning infrastructural shortcomings can be addressed. Furthermore, over the first 10 years of the new century, the Bombay Sensitive Index has risen 214 per cent in dollar terms, outperforming the Shanghai market by 8 per cent.