India’s Viksit Bharat aspiration of becoming a developed country by 2047 is an apt north star. Achieving this objective would require the Indian economy, currently at almost $4.2 trillion, to grow roughly seven times its size to $30 trillion. That is steep, but lofty goals are meant to stretch institutions and organizations to re-imagine, re-configure and then execute accordingly.
After the 1991 liberalization of India’s economy, its annual real GDP growth has averaged about 6.3%. Even after the 2008 global financial crisis, this rate has stayed about the same. But volatility around this seemingly stable long-term average pace of growth has surged.
Between 1992 and 2008, the lowest and highest growth rates were 3.3% and 8.8%. After 2008, the range has widened to between –5.5% and 9.7%, with both extremes occurring in the last 10 years. If one uses standard deviation to measure GDP-growth volatility, it has increased by two-and-a-half times over the past decade compared to the period before 2008.
Arguably, this volatility is predominantly due to external shocks. India’s worst years have been on account of events beyond its control. If we ignore GDP data for three years—2001 (the dot-com bubble aftermath), 2008 (global financial crisis) and 2020 (covid pandemic)—the average from 1992 till date rises to 6.8%, and to 7.1% for the period after 2008.
Clearly, reducing growth variability and managing one-off shocks to the economy are critical if the size being targeted over the next couple of decades is to be achieved. At a steady 7% rate over 10 years, the economy’s size nearly doubles. But a growth rate of 8-9% in nine out of 10 years and -5% in a shock year would deliver a smaller economy than in the steady scenario.
Aim to be anti-fragile, not just resilient: The list of potential external shocks has been lengthening—disruptive new technologies, intensifying climate extremes and geopolitical choke-points, alongside abrupt tariff and supply-chain shocks. Their frequency and intensity has also been increasing.
This is where Nassim Nicholas Taleb’s construct of anti-fragility becomes pertinent. To explain, a fragile system is one that breaks under stress. An anti-fragile economy is the opposite; it gets stronger under stress. This differs from resilience, which refers to a system that quickly bounces back after the stress is gone. India has been among the most resilient of large economies, as seen in past crises (including covid).
However, the country still needs to weave anti-fragility measures into its policy initiatives .
Applying anti-fragility to nations: Anti-fragility may be achieved by focusing on five aspects. One, create planned redundancy for critical utilities. Two, let minor disruptions and experiments reveal emerging weaknesses and strengths. Three, decentralize relevant authority. Four, ensure skin-in-the-game among decision-makers. And five, take some national bets that can withstand global crises and shocks (and ideally benefit from these).
Diversity of economic activity, skill-sets, federal polity and even climate already offers India a strong foundation for anti-fragility. So, failure in a particular industry, firm or state is unlikely to cascade into a systemic failure. Still, shocks do dent long-term economic growth. So anti-fragility is a must.
Some policy initiatives already have traits of anti-fragility. However, the focus needs to be sharper and cover all policy thinking. Here are a few areas.
Competitive federalism: Allow states enhanced fiscal and regulatory space to nurture different industries and experiment with seeding new ones. These should go beyond industry clusters and states should do their own tinkering with business models, technologies, skilling programmes and labour engagements; the Centre’s role would be to track systemic risk, set standards and provide budgetary support.
Planned redundancy: Digital utilities such as internet connectivity, payment systems and data assets get efficiency from scale. But in crisis, a single point of failure can cause disruption. India needs parallel systems.
Adopt a barbell strategy for economic initiatives: This refers to an investment strategy where one puts the bulk of one’s investment in low-risk, tested activities and a small portion in initiatives that are high risk but can offer exponential returns—say, in case of a crisis or black-swan outcome.
A barbell strategy would suit India well. Thus, most effort should go into ensuring a stable and resilient base, especially in terms of consumption, infrastructure and small firms-driven growth. At the same time, calibrated high-risk bets could be taken on R&D in quantum computing, climate technology, space tech , bio-engineering and medical tourism.
Mid-risk strategies that offer some upside but with a notable downside in case of a crisis are avoidable. For example, solely application-focused artificial intelligence without any core capability or intellectual property; this may increase import dependency of tokens and see much of the value generated flow out of India as profit repatriation.
The most difficult for any country to adopt may be the ‘skin in the game’ doctrine. Yet, decision-makers whose choices result in increased systemic fragility should ideally face palpably adverse consequences.
The road to Viksit Bharat runs through an increasingly shock-prone world. India needs to understand its vulnerabilities and adopt anti-fragile thinking.
The author is a risk management and AI consultant, and a member of the visiting faculty, IIM Ahmedabad and IIM Calcutta.