The Indian economy is facing increased scrutiny as comparisons with China intensify. China, which drove global growth for nearly three decades, contributed significantly to global GDP expansion from 1990 to 2020. Between 2013 and 2021, China was responsible for nearly 39% of global GDP growth—13% more than the combined contribution of the G7 countries.
For India to follow in China’s footsteps, it would need to achieve nearly double-digit growth for several decades, become a major player in the global manufacturing supply chain, shift towards export-led growth, and attract substantial foreign investment. Although this is a formidable challenge, India is at a pivotal moment similar to China’s position over 40 years ago.
China’s rise was catalyzed by significant political and economic changes in the 1970s, including the U.S.-China rapprochement. This shift allowed China to implement reforms and attract global businesses seeking cost-effective operations. Today, as the West grapples with the growing influence of China and seeks to diversify away from it, India is emerging as a favored alternative due to its strategic importance in countering China’s expanding influence.
This transition mirrors the past, as global businesses now look for alternatives to China due to regulatory challenges and geopolitical tensions. The Indian government is seizing this opportunity, supporting major projects such as semiconductor assembly and iPhone manufacturing.
Additionally, India benefits from a large consumer base, with over 500 million people spending above $12 a day. By 2030, this number is projected to grow to 773 million. This consumer market could become a significant asset for India’s economic growth.
However, India’s path is fraught with challenges, including rising global protectionism and a retreat from globalization. These trends are reshaping global trade dynamics, which could hinder India’s ambitions. Moreover, while India’s consumer market is an advantage, it is not as critical as factors like openness to foreign investment and ease of doing business. Countries like Singapore, Vietnam, Malaysia, and Thailand have attracted higher foreign direct investment relative to their GDP despite smaller markets.
India contributes 16% to global economic growth, compared to China’s 34%. The IMF forecasts that India’s share will increase to 18% in the next five years. As China’s economic growth slows, India is well-positioned to become a leading growth engine, provided it can effectively address these challenges.
