In the last decade, the Indian economy experienced good economic growth with a reduction in the poverty rate, growth in consumption, and a significant increase in the middle class. Even now, India's economy is gradually recovering from the economic consequences of the Covid-19 pandemic.
The remarkable rise of the Indian economy and its transformation from a weak country to a giant power is an important development that has happened for several reasons. In the past years, in fact, the Indian government has taken many policy initiatives to strengthen the economy, rapid economic growth, and exports of the country.
Reasons such as New Delhi's attention to the service sector, implementation of reforms, increase in industrial production and exports, suitable foreign policy and acquisition of new markets, focus on the information technology (IT) sector, increase in consumption, and private investment have a tremendous impact on India's economic growth.
In fact, the Indian economy has been able to obtain a suitable rank by using the resources available inside and with the evolution of foreign policy. In addition, recent developments such as the increase in foreign exchange reserves, increase in private sector investments, increase in goods exports, the continuation of the flow of foreign direct investment, and proper economic growth have caused India to become the fifth largest economy in the world. In addition, a number of important programs of the government, including Make in India, Startups, Digital India, Smart City, Tourism Development, etc. have been under the country’s consideration. India is a leader in the field of digital infrastructure and has shown a unique approach to emerging technologies.
While several foreign players and companies have paid more attention to India through New Delhi's initiatives like Make in India and Digital India, in recent years, the government has also taken great steps in signing free trade agreements (FTA) with its trading partners. Also, the construction of industrial infrastructure in India and the economic development of this country has caused a suitable platform to be provided for the transformation of this South Asian country into a major economic pole in the global economic future.
However, the lack of complete dependence on a particular industry is one of the characteristics of the Indian economy. Industry, agriculture, services, and financial sector are important economic and commercial sectors of India. But the poverty of the people and the low GDP per capita of this country should not be neglected. In this situation, could India as one of the emerging economies, become a bigger player in global trade and economy?
Economic diplomacy and progressive foreign policy: Certainly, there is a direct relationship between economic development and foreign policy. The continuation of an important part of India's economic growth and development depends on the continuation of its domestic policy and economic diplomacy. Therefore, New Delhi needs to define specific priorities in its economic diplomacy at the global level to become a leading economic power. Now, the continuation of an active approach to economic diplomacy and progressive foreign policy can cause India to grow in the global economic pyramid and strengthen India's position in the global power structure.
The state of geopolitical challenges: The global economy is paying a huge price for Russia's war against Ukraine. Geopolitical challenges such as the current war reduce economic growth and put more pressure on prices and many economies. In fact, risks such as unfavorable geopolitical developments may have an effect on the prospects of the Indian economy in the short and long term.
If we do not witness the escalation of the crisis in Russia and Ukraine, a massive slowdown in the growth of advanced economies, and the direct involvement of several countries in the war, these elements could ave more positive effects on India.
Meanwhile, it is unlikely that New Delhi will enter into a military challenge and conflict with China and Pakistan. India has balanced its strategic relations with Russia and closer cooperation with the United States, Japan, and Australia is an important part of India's progressive foreign policy.
However, long-term crises have had consequences for financial stability, the energy crisis in Europe and the decrease in economic growth in China. In the meantime, it should be noted that inflation and challenges associated with the possibility of a recession in several advanced countries can also affect the Indian economy. Also, adjustment of global demand can reduce India's exports.
Access and transfer of energy: Energy is still the key to the economic growth of many economies like India. New Delhi needs the energy to meet its growing needs. India's energy needs are still increasing, and in fact, any major security-geopolitical developments in the Middle East will cause a wide fluctuation in the price of crude oil and its impact on the growth of the Indian economy.
In this regard, attracting massive investment to develop its oil and gas infrastructure is part of India's important steps. It seems that India can supply about two-thirds of its new energy consumption from renewable energies such as biogas, hydrogen, wind, and solar energy, and achieve 40% of energy from renewable and non-fossil sources by 2030. If New Delhi succeeds in these programs, it will practically reduce the dependence of the Indian economy on imported energy from fossil fuels; Something that can be in the direction of rapid economic growth of the country.
Continuity of Investment: Although, India has become a destination for many investors, and the country’s high ranking in foreign direct investment among developed countries is appropriate, But, many foreign investors still find doing business in the country challenging compared to countries like China. However, if New Delhi continues to ease foreign investment laws, lower taxes, and give more infrastructure incentives, multinational companies will be inclined to invest in India and increase the share of India's manufacturing and export sectors. In addition, increasing the number of remittances from workers and the Indian diaspora will also play an important role in increasing the position of the Indian economy.
Taking advantage of opportunities and reducing inequality and reforms: More than half of India's workforce is employed in agriculture and related sectors. Rural India has changed a lot in the last few decades, but agriculture still lags behind compared to other countries. In the meantime, India's economic development and city-oriented economic growth have increased the urban-rural disparity. Uneven growth along with the increase in the number of Indian billionaires has caused the government to pay more attention to dealing with widespread unemployment and providing subsidies to the poorest people.
But due to its medium per capita income, India is not still a powerful economy. Therefore, to create stable growth in the economy or a higher growth rate, it is important to reduce the poverty rate. With a population of about 1.4 billion, India will overtake China as the world's most populous country next year. In the meantime, it is important to establish a kind of balance between controlling the population growth rate, controlling the poverty rate, and the working-age population of India.
In fact, the average age in India is lower than that of China. If New Delhi has detailed plans for reforms, dealing with inflation, and financial market fluctuations, creating diversity in crop cultivation, developing industrial and economic infrastructure, and reducing inequality, it can pave the way for India to become the third-largest economy in the world by 2027 and surpass from Japan and Germany to make it easier. It also seems that if India can use its young population as an opportunity for future economic growth, job creation, and economic growth and development, the economic outlook of this country will be brighter
Vision
Despite the challenges, India has features and variables that can make it easier for this country to reach a 5 trillion dollar economy by 2024-2025 or even a 20 trillion dollar economy in the medium term. On the one hand, India is more independent of the world economy due to its flexibility, economic nature, and high domestic demand, and despite the recession of other economies, it is unlikely to be in a bad situation.
Also, due to the existence of several variables and elements, India's access to higher exports, maintaining the fastest growth among major economies, and winning the title of the top economy in the future will not be far away. Although the World Bank lowered India's growth forecast for the year 2023 to 6.5%, New Delhi's successes and steps in the economy have led to hopes for higher growth than others in Asia and the Pacific (such as China, Japan, and South Korea) for India in the near future.
In fact, there are risks of geopolitical tensions, and global recession, and perhaps global growth will slow down in 2023-2024 and remain slow. But by chairing groups like the G20, New Delhi will have an opportunity to play a greater role in the world economy. Or, While many economies may shrink in the long term, it is not far-fetched to expect India's share of 16.2 percent of world GDP in 2100.
