In a matter of days, India will kick off the world’s largest democratic election.
An estimated 960 million people in a nation of 1.4 billion are eligible to cast their votes in the upcoming polls, beginning this Friday and spanning over a month. Narendra Modi is widely anticipated to secure an uncommon third consecutive five-year term as prime minister.
Under his stewardship, India stands on the brink of emerging as a 21st-century economic juggernaut, presenting a viable alternative to China for investors and consumer brands seeking growth, as well as manufacturers aiming to mitigate risks in their supply chains.
As relations between Beijing and the West fray, India enjoys robust ties with most major economies and is actively courting large corporations to establish manufacturing plants in the country.
So, does the buzz surrounding Modi’s India, still predominantly impoverished, hold merit?
The reliability of economic data in India poses a challenge, making it difficult to gauge the ground reality in the world’s most populous nation.
However, utilizing data from reputable sources, CNN has compiled five charts illustrating India’s performance since Modi’s ascent to power in 2014 and examining the hurdles the next leader will confront in managing the globe’s fastest-growing major economy.
Persisting Poverty
India’s economy reached $3.7 trillion in 2023, propelling it to the world’s fifth-largest economy, climbing four spots in the rankings during Modi’s tenure.
The South Asian titan’s economy is poised for an annual expansion of at least 6% in the coming years, yet analysts argue it should aim for growth exceeding 8% to ascend to economic superpower status.
Sustained growth will propel India higher among the world’s largest economies, with projections suggesting it could claim the third spot behind only the US and China by 2027.
Nonetheless, India could do more to elevate its gross domestic product (GDP) per capita, a metric of living standards in which it ranked a dismal 147 in 2022, according to the World Bank.
Guido Cozzi, a macroeconomics professor at the University of St. Gallen in Switzerland, anticipates “trickle-down effects on per-capita GDP” as the economy expands. However, he cautioned that “trickle-down economics does not guarantee a reduction in income inequality, necessitating policies promoting inclusive growth.”
Paving the Way for a Modern India
Similar to China’s transformation over three decades ago, India embarks on a massive infrastructure overhaul, channeling billions into constructing roads, ports, airports, and railways. Concurrently, private investors are spearheading the construction of the world’s largest green energy facility.
In this year’s federal budget, $134 billion was allocated for capital expenditure to fuel economic growth.
The results are palpable, with frenzied construction projects underway nationwide. Between 2014 and 2023, India augmented its national highway network by nearly 55,000 kilometers (around 35,000 miles), marking a 60% increase in overall length. Infrastructure development yields numerous economic benefits, including job creation and enhancing the business environment.
Modi’s investment in connecting India is evident. The national highway network has witnessed steady expansion, surging by 60% over the last decade.
In recent years, India has also pioneered a range of technological platforms — dubbed digital public infrastructure — that have revolutionized lives and businesses.
For instance, the Aadhaar program, launched in 2009, furnished millions of Indians with identity documentation for the first time, while also curbing corruption in welfare schemes. The Unified Payments Interface (UPI) enables instantaneous payments via QR code scanning, fostering financial inclusion and injecting millions of dollars into the formal economy.
Citing a World Bank report in September 2023, Modi underscored that India had achieved financial inclusion targets within six years thanks to its digital public infrastructure, a feat that would have otherwise taken 47 years.
Stock Market Ascendancy
The enthusiasm surrounding India’s growth potential resonates in its stock market, which has been scaling unprecedented heights. The market capitalization of companies listed on India’s exchanges surpassed $4 trillion late last year.
India boasts two major exchanges: the National Stock Exchange of India (NSE) and the BSE, Asia’s oldest bourse, formerly known as the Bombay Stock Exchange.
Driven by domestic investors, both retail and institutional, India’s stock market has surged to record highs.
According to Macquarie Capital, retail investors alone hold 9% of India’s equity market value, with foreign investors accounting for just under 20%. Analysts anticipate a surge in foreign investments in the latter half of 2024, post-election.
Burgeoning Industries
The Modi government is aggressively leveraging the global shift in supply chain strategies. International corporations seek to diversify operations away from China, prompted by pandemic-induced disruptions and escalating tensions between Beijing and Washington.
India, Asia’s third-largest economy, has introduced a $26 billion production-linked incentive program to entice companies to establish manufacturing facilities across 14 sectors, spanning electronics, automobiles, pharmaceuticals, and medical devices.
Consequently, global giants like Apple supplier Foxconn are significantly expanding their presence in India.
Billionaire Elon Musk recently expressed anticipation of meeting Modi in India, hinting at a forthcoming substantial investment by Tesla. The automaker is reportedly scouting locations for its inaugural Asian factory outside China.
Until two years ago, Apple typically commenced assembly in India seven to eight months after product launches. However, in September 2022, Apple began manufacturing new iPhone 14 models in India mere weeks after their debut.
Analysts laud this strategic shift as a significant victory for Modi, as deeper ties with manufacturing giants like Apple are expected to attract additional players in the global electronics manufacturing ecosystem to India.
According to market research firm Canalys, up to 23% of iPhones will be manufactured in India by the end of 2025, up from 6% in 2022.
Job Market Challenges
However, India’s economy, much like its democracy, grapples with imperfections. If re-elected, Modi must confront the colossal task of generating millions of jobs for a populace that remains predominantly impoverished.
With an average age of 29, India boasts one of the youngest populations globally, yet it has yet to harness the potential economic dividends from its youthful demographic.
A report by the International Labour Organization last month revealed that educated Indians aged 15 to 29 face higher unemployment rates than their less-educated counterparts, indicative of a mismatch between aspirations and job availability.
Youth unemployment rates in India now surpass global levels, the report highlighted.
The unemployment rate for educated Indian youths aged 29 and below exceeded 29%, nearly nine times higher than those lacking basic literacy skills, the report disclosed.
“The Indian economy has failed to create sufficient remunerative jobs in non-farm sectors for newly educated youth entering the workforce, contributing to high and escalating unemployment rates,” the report concluded.
