2024-04-05 13:02:17
Two weeks before the legislative elections in India, the country announces growth of 7.6% for the fiscal year which is ending. India’s performance has even surpassed that of China for 8 years (except for the year 2020, that of Covid) and the country could ultimately become the third world power. Decryption.
This is a trend that we have been observing for several years; India dreams of itself as the new locomotive of the world economy, a role that it would like to take from China.
The Xerfi cabinet even speaks of a tipping point, because India received more foreign direct investment than its powerful neighbor last year. Among the world’s major economies, the country is not only the most populous, but also the one where growth will be the strongest this year.
The keys to its success are to be found in particular in its demographics, domestic demand drives the rest of the economy and fuels Indian GDP and the workforce is abundant.
Also read: India, a leading demographic power in search of an economic miracle
The Indian government has also implemented a unified tax on goods and services which brings in very good tax revenues. This allows it to invest massively in infrastructure, rail, airport, road, but also digital, which promotes the industrial development of the country.
According to the IMF, India’s current GDP is $3,730 billion, making it the 5th largest economic power in the world.
But India still has many challenges to overcome before becoming the third world power behind the United States and China
India is currently in fifth place and should overtake those currently occupied by Germany and Japan which suffer from fairly low growth rates: close to 1% for Japan and 0.3% for Germany. It is therefore far ahead in terms of growth.
But be careful not to confuse growth and size of the economy
India today represents only 10% of the GDP of the Asian region, far behind China, and it is not a driving force like its powerful neighbor can be, underlines the Xerfi firm. China alone represents 50% of regional GDP.
India’s major challenge remains to create a significant middle class, but also to reduce inequalities.
The strong demographics also present major challenges, such as training and job creation for the 13 million new people who enter the job market each year.
However, India is carving out the lion’s share in certain key markets
Geopolitical tensions have increased between China and some of its historic partners such as the United Kingdom and the United States. And India particularly attracts electronics manufacturers with heavy incentives such as tax reductions for example or easier acquisition of land to set up factories. The country is notably home to Samsung Electronics’ largest mobile phone factory, Apple also manufactures seven of its iPhones in India through its contract manufacturer Foxconn Technology group.
The objective is to develop the manufacturing industry in order to export more and make the economy more self-sufficient by reducing the need for imports.
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