India's Booming Growth: Round 2

India is well known for its rapid growth and for being part of the development as a part of the BRICs but in recent months there has been a lot of speculation about India's economy. Many claimed that their growth was caused by a short term boom which would result in suffering for the economy in the long run. However it turns out India have set a good example to the world in how to prolong economic growth. Paul Collier talks about the "Bad Governance Trap" in the Bottom Billion leading to the downfall of many countries but what happens when the government does it right?

Go to one of India's major cities and you are immediately hit by big buildings, smoothly paved roads and traffic jams; some struggle to believe they really are in India, but go to some of the villages and smaller towns, and it's a completely different story. Dirt roads full of bumps and pot holes, poor mobile service and the list goes on. During India's booming growth there was an abundance of GDP flowing into the government, which was re-invested into the economy. Most importantly, it was invested into the right areas and this is why some are beginning to believe there could be a second boom on the horizon for India. Over the past decade new tarmac roads have been formed and old dirt roads have been tarmacked. All the aunties and uncles have mobile phones and the farmers are using computerised land records. Less people have to go out and collect firewood as they can now used bottled gas saving them time. The new houses are being built from cement and bricks instead of the wooden huts of the past. India is in transition. 

So how is this going to lead to a second wave of booming economic growth for India? It means with a better infrastructure, the subsistence farmers can turn their attention towards starting up businesses. India is beginning to move away from the agricultural sector, a move that will bring showers of benefits for both the economy and individuals. In terms of the economy, the move from agriculture to business means higher inflows especially from exports which will contribute to GDP therefore enhancing economic growth. For the individuals, they will experience a rise in incomes from the move to business as well as create jobs for others who will benefit. As a result many Indians can move out of absolute poverty due to the higher paid jobs made available to them. So India can further eliminate poverty from the country as it has done successfully over the last 5 years with the percentage of the population living in poverty declining by 21.54% since 2005.