India: the next superpower
India is now the most populous country in the world, with a working-age population of about 900 million, but its GDP is only $3.75 trillion.
While the focus in recent years has been on China’s annual growth rates, India consistently outperformed China in 2016 to 2019. Whilst India’s economy contracted by 5.83% in 2020, it bounced back strongly, with growth rates of 9.05% in 2021 and 7.24% in 2022. Admittedly, as a less developed economy, India has more scope for sustained periods of stronger growth than both China and the USA. Nevertheless, India’s economy is already the 5 th largest in the world and it has been predicted that, by 2075, it will be the
Figure 3 - A comparison of growth rates
second largest economy. 8 The Indian government is spending the proceeds of that development wisely. Capital investment increased from 11% of government expenditure in 2010 to a projected 22% this year. 9 In 2024 infrastructure expenditure will reach $122 billion. On average India constructs 10,000km of new motorway each year. There are now twice as many Indian airports as in 2014. Such government investment stimulates demand for raw materials and labour, boosting employment and (provided that the materials and labour are internally sourced) encouraging a positive multiplier effect. 10 Better transport infrastructure encourages not only internal and direct foreign investment in business and enterprise 11 but also increased tourism. 4,380,000 foreign visitors arrived in India between January and June 2023, a 106% increase on the corresponding period in 2022. Spending by such visitors develops the tourist and hospitality industries and contributes to Indian GDP growth. The Indian economy benefits immensely from India’s far -reaching diaspora. Over 30 million Indian citizens live outside India. Not only do they project Indian culture around the world, but they also boost the Indian economy in at least three ways. First, by sending remittances to family and friends, the diaspora boosts India’s GNI. Such remittances make up 13.2% of global remittances 12 and 3.2% of 8 ‘India Is Now the World’s 5th Largest Economy,’ World Economic Forum, February 26, 2020, https://www.weforum.org/agenda/2020/02/india-gdp-economy-growth-uk-france/. 29/7/24. See ‘How India Could Rise to the World’s Second-biggest Economy,’ Goldman Sachs , July 6, 2023, https://www.goldmansachs.com/insights/articles/how-india-could-rise-to-the-worlds-second-biggest- economy. 26/7/24. 9 Bhaskar Chakravorti, ‘Is India the World’s Next Great Economic Power?,’ Harvard Business Review, September 6, 2023, https://hbr.org/2023/09/is-india-the-worlds-next-great-economic- power#:~:text=Not%20just%20enthusiasts%20within%20the%20country%2C%20but%20a,be%2030%25%20 larger%20than%20that%20of%20the%20U.S. Consulted 24/7/24. 10 Increased employment should lead to more workers having more disposable income to spend. When they spend it, that should stimulate further yet further demand for goods and services within the Indian economy, creating a yet more jobs providing yet more workers with yet more disposable income. 11 In the 2013 financial year India received an inflow of $34.3 billion in FDI. In the 2022 financial year India received an inflow of $84.84 billion - see India: FDI inflow amount for all sectors 2024 | Statista. 12 IANS and Ians, ‘India Tops Global Remittances List With $125 Bn Inflow: World Bank Report,’ National Herald , December 19, 2023, https://www.nationalheraldindia.com/international/india-tops-global-remittances-list- with-125-bn-inflow-world-bank-report. Consulted 31/7/24.
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