India is stepping into the limelight as it’s expected to surpass China as the most populous country this year, according to a recent UN report. Many believe that India is also set to rival China and the US as major economic superpowers. Having already overtaken the United Kingdom as the world’s fifth-largest economy, it’s projected to surpass Germany’s No. 4 spot by 2025. The International Monetary Fund (IMF) predicts India’s GDP will grow by 5.9% this year, outpacing the 30 largest economies. Let’s delve into the factors contributing to India’s promising economic future and the challenges it faces on this journey.
The Case for India’s Economic Rise
India boasts a colossal labor force of 900 million working-age people, which continues to grow, unlike most major economies facing an aging population. The Indian government has been investing in infrastructure improvements and easing regulations to attract foreign investment. As a result, companies looking to diversify their supply chains from China are considering India as an alternative manufacturing hub. Apple recently started assembling its new iPhone in India, and Volvo hinted at manufacturing electric vehicles there.
India’s homegrown success stories include over 100 unicorn startups and $24 billion in venture capital investments last year, placing it fourth globally, ahead of Germany and Israel. Indian-born business leaders like Google CEO Sundar Pichai and Microsoft CEO Satya Nadella are making their mark on the international stage. Additionally, India’s growing middle class presents an untapped consumer market for multinationals, with companies like Apple and Dior expanding their presence in the country.
Challenges Facing India’s Economic Ascend
Despite its massive population, India’s education system struggles to prepare job candidates for successful careers, resulting in a 20% unemployment rate among college graduates. The country’s income inequality, inadequate infrastructure, corruption, and waste management issues may deter companies from investing in India.
Moreover, India’s high tariffs and complex political landscape could repel foreign investment. Critics express concern about Prime Minister Narendra Modi’s authoritarian tendencies and argue that his aggressive approach toward political opponents raises red flags for businesses.
Nobel Prize-winning economist Abhijit Banerjee believes India should address domestic issues such as inflation and societal health to attract international investors.
In Conclusion
The UN predicts that India’s population could start declining in 2047, which means the country’s window of opportunity to become a world economic power is open but may not last forever. To reach its full potential, India must overcome various challenges and capitalize on its strengths to secure a place at the top of the global economic hierarchy.