India Is the Fastest-Growing Economy on the Planet

One of the world’s foremost economists suggests which catalysts propelled India out of desperate poverty – and predicts how the subcontinent will turn its sprint into a marathon.After years of trailing in China’s shadow, India last year galloped ahead to become the fastest growing major economy on the planet. Its GDP crossed the 2015 finish line at a 7.6 percent expansion rate, according to the World Bank.

Dale Jorgenson, the Samuel W. Morris University Professor at Harvard University, wanted to know just what India did in recent years to goose its economy. Beyond wishy-washy, paragraph-long truisms that academics, politicians and laypeople have credited with economic growth, he sought some quantifiable metrics.
In his new book, The World Economy: Growth or Stagnation? (2016, Cambridge University Press), he and his coauthors examined 40 countries throughout the world. To determine which factors contributed most to growth, they weighed each of the five KLEMS components: Capital (which uses the K), Labor, Energy, Materials, and Services Purchased.

As Jorgenson explained at a recent event sponsored by the Chazen Institute and the Raj Center for Indian Economic Policies, the KLEMS data revealed a somewhat startling pattern. “Our findings contradict conventional wisdom that productivity leads to growth,” he said. Instead, “we determined that a sharp acceleration in investment made up the predominant source of growth in the world economy,” led by the emerging markets of China and India.