The Unprecedented Journey
of Development

Mr Neelkant Mishra
Chief Economist, Axis Bank
Head of Global Research & Member of the Board, Axis Capital and Part-time Member, EAC-PM

The path ahead is both exhilarating and formidable. The aspiration is to achieve in five or six decades what took others nearly two centuries. This ambition—to transform from a low or middle-income economy into a prosperous nation within one generation—demands growth at a pace far faster than historical precedent. Driving at 20 kilometers an hour allows for errors and correction. Driving at 80, however, requires sharper vision, constant vigilance and the courage to take risks. That is the reality of development today.

What makes this journey more remarkable is its democratic foundation. Most countries that achieved rapid transformation in recent history did so under autocratic regimes. South Korea, Taiwan and Spain were not democracies when they leapt forward. Even the United States, the United Kingdom and Japan industrialised before full democratic participation. Universal franchise and accelerated growth have never gone hand in hand. What is attempted here is nothing less than unprecedented: to deliver prosperity while deepening democracy.

Compounding the challenge is the mismatch between demographic and economic transitions. Fertility rates are falling faster than incomes are rising. In earlier eras, nations could sustain 6–7% growth for decades and still achieve prosperity in time. Today, the median age is rising too quickly. Once it crosses 40, economies naturally decelerate. That means there are barely 20 to 25 years to achieve high-income status before aging slows momentum. The urgency cannot be overstated: policies, reforms and investments must all be accelerated now.

A useful way to frame this challenge is through the four factors of production: land, labor, capital and entrepreneurship. Each plays a decisive role and each requires attention if development is to be sustained.

Capital is the domain where the most visible transformation has occurred. Relentless fiscal discipline has brought borrowing costs down to historic lows. Today, a 10-year AAA bond yields around 7%, while government securities stand at 6.5%—the lowest non-crisis levels since independence. Equity is no less attractive, with price-to-earnings ratios at 22–23 times. Over $40 billion flows in annually through systematic investment plans, providing a steady pool of risk capital. Corporate taxes have been cut, allowing entrepreneurs to retain more of their earnings.

The financing ecosystem has also matured. Angel investment networks are now active across towns. Venture capital firms provide pre-Series A and Series A funding, while larger buyout funds offer exits worth hundreds of millions. For entrepreneurs, there has never been a more favorable mix of debt and equity.

Yet challenges persist. Bond markets remain shallow and raising small-ticket loans is still difficult. Inequality inevitably rises when capital is more easily available in large chunks than in small ones. Here, digital public infrastructure plays a crucial role. Jan Dhan accounts have not only enabled savings but also created transactional data through India Stack. Frameworks like the Open Credit Enablement Network (OCEN) and the Open Network for Digital Commerce (ONDC) promise to expand access further. Still, these are works in progress. To sustain growth without political backlash, small entrepreneurs must gain the same access to credit as larger players.

The other three factors—land, labor and entrepreneurship—lie mostly in the domain of state governments. This is where federalism becomes critical. While global observers often focus on Delhi, real change is increasingly visible in the states. Rajasthan has allowed women to work night shifts, opening new opportunities in manufacturing and services. Tamil Nadu has whitelisted industries to reduce approval bottlenecks. Odisha has partnered with global firms, hosting a vast textile park with Japanese major Uniqlo at Cuttack, large enough to reshape regional supply chains.

Semiconductor ventures illustrate this dynamism. Indian firms, partnering with global technology leaders, have launched projects that reached first output in as little as 14 months. States like Gujarat have provided exemplary support, impressing foreign partners with efficiency. These stories are not isolated. Across the country, factories are moving from conception to production in nine to fifteen months—timelines once thought possible only in China.

Such differences highlight the diversity federalism allows. Odisha and Jharkhand, for instance, began the millennium with similar per capita incomes. Today, Odisha’s per capita output is twice that of Jharkhand. Both are mineral-rich, but governance and reform have made the difference. Bihar, meanwhile, faces elections where industrialisation and job creation scarcely figure in the agenda—a reminder that democratic pressure from citizens is essential for development to remain a political priority.

Urbanisation presents both the greatest challenge and the greatest opportunity. Housing stock, infrastructure and city governance will drive demand for decades. The contrast is stark: the average Indian lives in 130 square feet of built space, while the average Chinese in a tier-three town enjoys 550 and the average American 700. As incomes rise, the demand for housing will surge, creating one of the largest markets for construction and urban infrastructure anywhere in the world.

Cities are already showing signs of transformation. Mumbai’s new infrastructure has reduced travel times dramatically. Bangalore’s administrative restructuring reflects growing pressure from urban residents. Yet fiscal flows remain skewed. In China, over half of fiscal resources flow directly to city governments. In India, the share is under 5%. Even promising schemes like the Urban Challenge Fund, though innovative, are underfunded. To truly accelerate growth, allocations must rise tenfold.

District-level planning is the next step. With Uttar Pradesh alone as populous as Indonesia and its districts as large as Indonesian provinces, the importance of local planning cannot be ignored. Encouragingly, the state government has begun drafting district growth plans, an approach that must spread nationwide. Development cannot be dictated from the top down. It must emerge from local pressures, democratic demands and the aspirations of citizens. The role of policymakers and advisors is to enable this process, to ensure supply-side constraints are eased and to support local reforms that generate growth.

The backdrop to all of this is surprisingly positive. Post-pandemic growth has exceeded expectations. Global shocks, rather than derailing progress, have created an environment more open to bold, disruptive reforms. Citizens, businesses and leaders alike appear more willing to embrace transformation.

The challenge remains immense: to grow quickly, inclusively and sustainably, before demographic advantages fade. Yet the opportunities are equally immense. Capital is cheaper than ever, entrepreneurial ecosystems are diversifying, state-level reforms are accelerating and urban demand promises to unleash decades of growth.

This journey is without precedent. No nation has combined rapid growth, universal democracy and swift demographic change in quite this way. But if reforms continue, if state-level competition deepens, if urban and district-level governance is empowered and if inequality is contained through inclusive finance, then the dream of becoming a developed nation within a generation is not only possible—it is within reach.