India's economic transformation is in full swing. Global manufacturers are looking beyond China, and Prime Minister Narendra Modi is trying to seize the moment. This fiscal year, the government is spending nearly 20 percent of its budget on capital spending, the highest in at least a decade, Bloomberg reported.
Modi is closer than any of his predecessors to saying that the country, which may have recently surpassed China in world population, is finally realizing its economic potential. To achieve this, it will have to grapple with the shortcomings of its exceptional scale: the remnants of the bureaucracy and corruption that have stunted India's rise, and blatant inequality.
India is on the cusp of tremendous change, said Nandan Nilekani, founder of Infosys Ltd. He said India has quickly created opportunities to support tens of thousands of startups, several billion smartphones and data rates that are considered among the lowest in the world.
Three key Taiwanese suppliers to Apple Inc. have received incentives from the Modi government to boost smartphone production and exports. From April to December, iPhone shipments more than doubled to more than $2.5 billion.
As big companies from China to Germany struggle with slowing growth, the stakes are rising to find another country capable of stimulating the global economy. Morgan Stanley predicts that India will drive a fifth of global expansion this decade, positioning the country as one of three countries that can generate more than $400 billion in annual output growth.
This thesis is reflected in global stock markets, with India's Sensex index trading at its highest level in a decade compared to the S&P 500 in the latest quarter. Compared to other emerging markets, Indian stocks have never been higher.
Of course, Modi's manufacturing aspirations are not new. His Made in India campaign began in 2014, seeking to emulate China and the East Asian tigers - from Singapore to South Korea to Taiwan - that have risen to the ranks of wealthy economies, filling factories with workers producing the products the world wanted to buy.
Increasing production to 25 percent of GDP, a key measure of the program, has proven elusive. According to McKinsey, the figure rose to 17.4 percent in 2020, up from 15.3 percent in 2000. Vietnam's industrial sector more than doubled its share of GDP over the same period.
But as president of the G20 this year, India has momentum. A foreign strategy based on multiple alliances and irreconcilable self-interest has led the country to increase its purchases of Russian oil 33 times, ignoring pressure from Washington. There are even some signs of pragmatism when it comes to strained relations with neighboring China - more than a dozen Chinese suppliers to Apple are getting initial permission from New Delhi to expand operations, supporting the tech giant's efforts to shift production to India.
In a multipolar world, India's choice of a middle path has reinforced its image as a nation with which everyone is interested in having a good relationship, said Kenneth Juster, former U.S. ambassador to India.
India is positioning itself and using its G-20 presidency to do so as a bridge between east and west, north and south, he said.
In an August speech marking India's 75th anniversary of independence, Modi urged the nation to settle for nothing less than world domination.
Bloomberg Economics expects the country's per capita income to grow even compared to some developed nations over that period, making Modi's goal achievable. According to BE, potential GDP growth will gradually peak at about 8.5 percent early in the next decade thanks to corporate tax cuts, incentives for manufacturers and privatization of state assets. The Center for Economic and Business Research predicts that India's economy will reach $10 trillion by 2035.
