Defining what it means to be a developed country

India’s relative fast pace of economic growth raises the question: when will India become a developed country?  In 2002 Prime Minister Atal Bihari Vajpayee had declared that India would be a developed nation by 2020. This was reiterated by President A P J Abdul Kalam in several speeches. On one occasion in March 2003, he said “we should not allow any religion or any individual fanatic to endanger our nation”. He said his goal of a Developed India by 2020 was based on a detailed action plan in areas like agriculture, education, healthcare, infrastructure and information technology. In 1998 President Kalam along with his colleague and scientist Y S Rajan wrote a book titled India 2020 which also described a vision for India becoming a developed nation. More recently Prime Minister Modi declared in his 2022 Independence Day speech that we should take a pledge to make India a developed country by 2047, the hundredth year of our independence. From the days of the speech of PM Vajpayee, the goal has shifted by another twenty seven years.

It is worth examining this question, of not just whether India can become a developed nation by 2047, but more fundamentally, what exactly is our definition of this concept. As a slogan and as a grand vision it is easy to articulate and captures the imagination of the people. It is a term used quite liberally in conversations. The World Bank has been using this term, of “developed” or “developing” countries almost from its inception. Most analysts and economists, especially those working for foreign banks, use acronyms like “DC” and “EME” all the time. These stand for “Developed Country” and “Emerging Market Economies”.  So just by constant usage these terms have gained acceptance.

Per capita income is simply a national average, and does not tell us anything about how that income is distributed across all sections of society

One obvious definition, also used by the World Bank is in terms of per capita income, measured in dollars. India is currently the fifth largest economy and will become the fourth largest in a year or two, after it overtakes Germany. But in terms of per capita income, it is still ranked below 130. India’s per capita income in dollars is about 2200, whereas the world average is above 12,000 dollars. The average of the OECD group of fifteen rich and developed large countries is 42,500 dollars. The Euro area average is roughly the same. North America is 68,000 dollars in per capita income. This is the most recent data available from the World Bank.

The average for South Asia is the same as India because it has a big weight (and incidentally the Bangladeshi per capita income is now ahead of India). The numbers look different if the dollar income is adjusted for purchasing power parity, i.e. to account for the fact that the domestic currency like the rupee in India’s case, has much greater purchasing power than implied by the exchange rate. Which is to say one dollar in India will get you much more than one dollar in America. Hence 2200 dollars in India is actually close to 7000 dollars in purchasing power parity terms. Even then India’s rank is 128 in the world, and 31 among Asian nations.

So reaching a developed nation category with per capita income of more than (say) 30,000 dollars is a tall order, if it has to be achieved in the next twenty five years. This question will not go away. It has been around since PM Vajpayee’s speech or even earlier. In 2008, at a big gathering, Amartya Sen was asked when he thought India would reach developed country status.  This was when India was already clocking 9 percent growth. He gave a classic Amatrya Sen-response. The nobel laureate said he had absolutely no interest in answering such a question!

The important point is that even if we are a fast-growing economy and manage to cross say, 10,000 dollars in per capita income, will it mean a “developed country” experience for all Indians?  Because after all, the per capita income is simply a national average, and does not tell us anything about how that income is distributed across all sections of society. Currently India is among the fastest growing economies, and yet we are providing free food rations to 81 crore people. This is due to concerns about their food security. The free food also adds to their “income” although it is not in the form of cash, but in kind.

Here are three metrics which are measurable and will really mean that India and her people have reached developed country status. The first is the availability of clean drinking water from a tap in the house. There is the national Jal Jeevan mission which is focused on this. Out of 19 crore rural households, roughly 3 crore have got tap connections. But mind you, this is not merely about a tap, but availability of potable, clean water. Which will reflect in much less water borne diseases, and less arsenic poisoning.  The second metric is about the quality of the local school, be it municipal school in cities, or a village panchayat school. In a developed nation parents will happily choose the nearest public school for their kids. But the current reality is that even people living in slums prefer to send their kids to a private school and engage high-cost tuitions. Even teachers who teach in municipal or village schools prefer to send their own kids to other private schools.

The third litmus test of being a developed nation is the use of public transport. A developed country is not one in which poor people can afford cars, but where even the rich travel in public transport like buses, trains and metros. This happens when the services are of high quality, punctual, reliable and affordable. Some big cities in developed countries have made buses totally free. And the ridership has gone up.  Thus, from these three “litmus tests” we can measure our progress toward becoming a developed nation.  Of course, there are many other metrics too, such as air quality, worker productivity, health status, elderly care, forest cover, lowering the carbon footprint, biodiversity and so on. But the three “litmus test” goals can suffice.

(Dr. Ajit Ranade is a noted economist)