With China's economy slowing and the West seeing it more as a rival than an economic partner currently, is it India's chance to take Beijing's place as the world’s next growth driver?
According to a Bloomberg report, the Indian stock market is booming thanks to foreign funding and the Centre's new trade deals.
The youthful market of 143 crore Indians is attracting international manufacturing bigwigs, who once clustered around southern China.
Aircraft makers such as Boeing are taking record orders from Indian airlines such as Air India and IndiGo, while the tech giant, Apple Inc, is scaling up production of India-made iPhones.
Although the picture looks rosy, India’s $3.5 trillion economy remains dwarfed by the $17.8 trillion Chinese economy. Economists are of the view that it would take a lifetime for India to catch up with its shoddy roads, patchy education, red tape and a lack of skilled workers.
What will India have to do to overtake China?
According to the Bloomberg report, there’s one important measure where India could overtake its northern neighbour far more quickly: as the engine of global economic growth.
Bullish investment banks, such as Barclays, believe that India can become the world’s largest contributor to growth within Prime Minister Narendra Modi’s next term.
The Bharatiya Janata Party is widely expected to win the 2024 Lok Sabha elections set to begin in weeks.
The analysis by Bloomberg Economics is even more optimistic, finding that India can reach that milestone by 2028 on a purchasing power parity basis.
To get there, the Modi government will need to hit ambitious goals in four crucial development areas — building better infrastructure, expanding the skills and participation of the workforce, building better cities to house all those workers, and luring more factories to provide them jobs.
According to a Bloomberg Economics analysis, India could become the World's No. 1 contributor to GDP growth as early as 2028.
China's economic growth averaged 10 per cent a year for three decades following the late 1970s reforms that opened its economy to the world. This is what has made China a magnet for foreign capital and given it greater clout on the world stage.
But the so-called ‘miracle’ phase of China’s expansion is now a thing of the past. The property crisis intersects with the growing Western concerns over China's dominance of supply chains and advances in sensitive technologies.
That, according to the Bloomberg report, is where India comes in. The Modi government is seeking to make the Indian economy more competitive, a shift that’s appealing to Western businesses looking to diversify away from China in search of a deep well of cheap labour.
PM Modi has made India’s accelerating economy a major part of his election pitch, pledging at a rally last year to lift the country’s economy “to the top position in the world” should he win a third term.
Indian government's allocation to infrastructure has more than tripled from five years ago to above ₹11 lakh crore ( ₹11 trillion) for the fiscal year 2024-2025, a figure that could exceed ₹20 lakh crore ( ₹20 trillion) if states’ spending is thrown in.
Modi is projected to invest ₹143 lakh crore ( ₹143 trillion) to improve rail, roads, ports, waterways and other crucial infrastructure in the six years through 2030.
At the same time, the Modi government has sought to tamp down inflation by banning exports of wheat and rice.
Earlier this decade, the Indian government rolled out incentive programmes of some ₹2.7 lakh crore ( ₹2.7 trillion) to encourage domestic manufacturing, with companies getting tax breaks, lower land rates, and capital to set up factories in India from states as well.
In Bloomberg Economics’ base case scenario, India’s economy will accelerate to 9 per cent by the end of the decade, while China will slow to 3.5 per cent.
That puts India on course to overtake China as the world’s biggest growth driver by 2028. Even in the most pessimistic scenario — in line with the International Monetary Fund's (IMF) projections for the next five years in which growth stays below 6.5 per cent — India overtakes China’s contribution in 2037.
India stands out as the sole country with a population large enough to offset retiring factory workers in advanced economies and China.
Bloomberg Economics estimates that some 48.6 million medium-skilled workers — typically employed on the factory floor — will retire from China and advanced economies from 2020 to 2040. In the same period, India will add 38.7 million such workers.
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FAQs
In Bloomberg Economics' base case scenario, India's economy will accelerate to 9 per cent by the end of the decade, while China will slow to 3.5 per cent. That puts India on course to overtake China as the world's biggest growth driver by 2028.
Can India overtake China's economy? ›
The Chinese economy may now be more than five times larger than India's, but India is growing much faster than China, and no one expects that to change anytime soon. Already, since 2010, India's economy has overtaken those of the U.K., France, Italy and Brazil in size.
Will India overtake the US economy? ›
It has the potential to eventually surpass China and the United States to become the “world's largest economic superpower” by the end of this century. If high growth rates can be sustained, India is expected to overtake the US and become the world's second-largest economy by 2075.
How can India defeat China? ›
TLDR: Nobody can win a direct, “fully fledged war”. Logistics and terrain, thankfully, have kept the two powers relatively out of each others way for the past 50 or so years, and would end any military campaign with ease. India would beat Pakistan if China tries that route to defeat India.
Can China overtake the US economy? ›
Some analysts even argue that China's economy may never surpass that of the United States. When considering further the vast soft power and geopolitical advantages the United States holds over China, it appears unlikely that China will displace the United States as a leading global power in the foreseeable future.
Who is more powerful, India or China? ›
This ranking is based on various factors, including economic conditions, strong international alliances, and military strength. India ranks at 5 in world GDP rankings after the US, China, Germany and Japan.
Is India's economy better than China? ›
In PPP terms, China's PFCE is approximately 1.5 times that of India. To put this in context, China's GDP (PPP) is approximately 2.5 times of India's. The relative gap between China and India widened from ~1.58 in 2018 to ~1.66 in 2020 and 2021, but 2022 witnessed India closing the gap to ~1.55.
Is USA richer than India? ›
The International Monetary Fund states the 2023 U. S. per capita GDP at $80,412. India is $2,612. For comparison, Mexico is $13,804. That makes the U. S. 30 times richer than India on a per capita basis.
Which country has the highest economy in the world? ›
The United States of America
The United States upholds its status as the major global economy and richest country, with a GDP of over $28.78 trillion as of 2024, steadfastly preserving its pinnacle position from 1960 to 2024.
Is India the world's next great economic power? ›
Key statistics highlight India's economic progress:
Rising GDP: According to IMF figures, India surpassed the United Kingdom in 2021 to become the fifth-largest economy in the world. Projections suggest that India could surpass Germany and Japan to become the world's third-largest economy by 2030.
It's incredibly unlikely that a single nation could conquer India, at least as of 2019 and the near future. Even the United States, the strongest military force on the planet would struggle to conquer India, in a hypothetical conflict. Now, India is ranked as the 4th strongest military in the world.
Who will win in a war, India or China? ›
Can China win a war with India? There are no absolute wins and defeats in modern warfare. It's more of a strategic and tactical win, if at all China could manage. China is more interested to see the reaction of Indian counterparts by provoking us on Doklam issue and failing miserably.
How strong is India's navy compared to China? ›
India has more than 67,000 active personnel in the navy, including approximately 10,000 officers and 57,240 sailors, as of June 2019. The People's Liberation Army Navy has more than 235,000 personnel in active service, including up to 20,000 marines.
Who has better economy, the US or China? ›
While the U.S. remains the world's largest economy, its growth rate has lagged China's, even as the No. 2 economy has slowed sharply in recent years. Last year, China's GDP expanded by 5.2%, compared to 2.5% for the U.S.
Can China become the world's largest economy? ›
The CEBR forecast suggests China could potentially take the top spot as the world's largest economy by gross domestic product as early as 2037.
Is the US more productive than China? ›
Professor of International Economics, IMD
US workers are, on average, 6.8 times more productive than Chinese workers, but the ratio varies across sectors. It's 16.0 in agriculture and only 5.1 in utilities, and 4.4 in public services. The importance of these sectors varies with the employment shares.
How long will it take for India to surpass China? ›
In April 2023, India's population is expected to reach 1,425,775,850 people, matching and then surpassing the population of mainland China (figure 1). India's population is virtually certain to continue to grow for several decades.
Which country will be richest in 2050? ›
According to The World in 2050 report by PwC, China is projected to be the world's largest economy by 2050, contributing approximately 20% of global GDP. China has already surpassed the United States to become the world's largest economy in terms of purchasing power parity (PPP).
In which field India is better than China? ›
China may be strong in manufacturing and infrastructure and India in services and information technology, but the latter's manufacturing industry is becoming globally competitive, while China's technology sector threatens to match India's in a decade.
Is China really as powerful as we Indians think? ›
Today, India lags far behind China on all three fronts. India invests about 30 percent of its GDP, compared with about 50 percent in China. Manufacturing is about 20 percent of the Indian economy; it is about 30 percent of China's. China has arguably the best physical infrastructure outside the Western world.
