India’s Moment

DONALD TRUMP, THE 45th president of the US and now a strong contender to be the 47th president wants to ‘Make America Great Again’. Like every country, the US may have its challenges, but on the one parameter that matters more than any other for greatness— wealth creation—the US is very much the greatest country on earth. The US continues to prove that the free market, warts and all, delivers prosperity and power. Challengers have emerged like Japan and China but, for now, it would seem only America has the dynamism to sustain its leadership in the economic sweepstakes.

Consider the list of the 10 most valuable companies in the world. Eight are American. The only exceptions are Saudi Aramco (at No 3), which owes its huge value less to economic dynamism than natural endowment, and the Taiwanese TSMC (at No 10), which fabricates semiconductors predominantly for cutting-edge American companies. If one considers the list of the next 10 most valuable companies, again, there are only two which are not American, the Danish pharmaceutical company Novo Nordisk and the French luxury couture, LVMH. The most valuable company of the second-largest economy in the world, China’s Tencent, comes in at No 26, its market capitalisation of around $330 billion, one-tenth the value of top-ranked Microsoft. The top company of the third-largest economy in the world, Japan, is Toyota at No 28. The top German company (of the fourth-largest economy in the world), software major SAP, is at 48. And the most valuable company of the fifth-largest economy in the world, India’s Reliance Industries, is at 44 (worth around $250 billion), perhaps a sign of India’s imminent overtaking of Germany in the size of GDP.

For a measure of dynamism over time, consider the fact that 40 years ago, in 1984, eight of the world’s 10 most valuable companies were American (like today), except that not one of those companies features in the top 10 today. Japan’s Toyota, which is its leading company today, was also its leading company in 1984, then in the top 10. Twenty years later, in 2004, again eight of the 10 most valuable companies in the world were American. Microsoft had made an entry into the top 10 but none of the other seven that are in the top 10 today featured. Many didn’t exist. The post-2008 global financial crisis years may have created fissures in America’s politics but the country’s leadership in terms of entrepreneurship and wealth creation is unchallenged, even as the cast of companies at the top has undergone a churn. Contentious, even messy, politics has not disturbed business because the government truly stays out of the business of business, more than in any other country of the world.

There is little reason to believe that this will change anytime soon. In today’s world, most valuable companies are at the cutting edge of technology or tech-driven sectors and are fundamental to every consumer’s life, whether Microsoft(software), Apple (devices), Alphabet (platform), Nvidia (semiconductor design), Amazon (e-commerce), Meta (platform), TSMC (semiconductor manufacturing), Eli Lilly (new drugs). Warren Buffet’s Berkshire Hathaway, also in the top 10 club, has created wealth by investing in some of the most cutting-edge technology companies in the world. Even China’s most valuable company, Tencent, is in the business of videogaming.

Can any of the next four largest economies in the world close the gap? China is the most likely candidate but under the leadership of Xi Jinping, who is more statist and controlling than any leader since Deng Xiaoping’s liberalisation, the probability is receding. Chinese entrepreneurs no longer have a free hand. Japan wasn’t able to close the gap during its peak in the 1980s. Now, sclerotic growth, an ageing population and a resistance to immigration isn’t likely to facilitate dynamism. Germany’s post-war corporatist model is stagnating. That its niche automobile industry hasn’t quite risen to the challenge of electric vehicles and trails both the US and China by some margin is not a good sign.

What about India? It has the growth. It has a young population. It has entrepreneurs. It has an open society. It has leadership with vision. But it also has a system of government that is still too interfering in business. If only the government were to disentangle from business, India would easily become the second most dynamic economy in the world. And, in time, scale the peak.

Fiscal policyGDP growthIndian economyMicrosoftNvidiayoung population