Not all is well in India

Looming domestic threats

India became the fifth largest economy in the world last year, surpassing the UK as economic growth rose to 6.8%, in 2022 according to the IMF. But, argues Arunima Sharan, there are potential domestic threats that could derail the country’s path towards becoming a superpower:

• Wealth and income inequality have worsened persistently since 1995. India has had the highest growth rate of ultra-high net worth individuals between 2018 and 2023 at 39%, but it is also home to the world’s largest number of poor people.
• The country also faces rising unemployment particularly affecting the young as youth unemployment between 2021-22 was 41.5% compared to an overall unemployment rate of 7.7%.
• Freedom House changed its classification of the country from ‘free’ to ‘partly free’ in 2021. There has been an increased crackdown on the media, both domestic and international, with recent tax raids on the BBC offices in India. This is also accompanied by more stringent laws governing foreign funding for non-governmental organizations and think-tanks, which have been under extreme scrutiny in recent months.

India poised between global clout and looming domestic threats
By: Arunima Sharan – OMFIF
China and India: The future of the global consumer market
By: Juan Caballero, Marco Fengler – World Bank

India: the friend-shoring destination

During the last 20 years the India’s manufacturing sector struggled, and economic growth was sustained by the services sector, which now accounts for 56% of the GDP. While the service sector has delivered robust growth rates, it has failed to absorb workers proportionately, leaving agriculture to sustain as much as 46% of India’s workforce with barely a 15% share of GDP. This imbalance translates into low productivity, pervasive informality, and persisting poverty.
There are signs that the situation might be changing: “India will be helped by its position as a “geopolitical sweet spot,” having friendly relations with key industrial countries in the West and East. This will allow India to benefit from global companies friend-shoring supply chains to diversify them away from China,” argues Nagesh Kumar.
India’s Evolving Industrial Policy Is Critical for Realizing Its Development Vision
By: Nagesh Kumar – Institute for Studies in Industrial Development (ISID), New Delhi