Let us first understand genesis of the rise of profile of India. India started to get noticed when India and US signed civil nuclear cooperation agreement in March 2006. Although India-U.S. relations were on stable course unlike earlier years which can be described as a period of roller coaster relation between two countries, it was not yet there for getting into something as significant as cooperation in civil nuclear deal even when India was -and still is - not signatory to Nuclear Non-Proliferation Treaty (NPT).
To facilitate the deal, President George W Bush went extra mile to push through amendment to domestic law and grant of an exemption from. Nuclear Supplier Group for nuclear cooperation with non-member India. It was unbelievable precedence for the global polity, which since then has been tracking India. The deal was in my opinion was the arrival of India on global stage.
The signing of the deal was part of a well thought out strategy by US. It was to bring India into the centre stage as a pivot to its Asia policy and as a counter to China’s growing clout. The reason to choose India was obvious. The largest democracy. With all its flows but still a democracy. Its economy on the rise consistently since it was liberalized in 1991. At the time of signing, India was the 14th largest economy in the ranking of GDP of 195 countries, rising per capita offering very large consumer market, housing, retail, infrastructure on growth trajectory, strong currency, large forex. India was clearly on robust growth path. Militarily, it was already having second largest army after China and a nuclear power.
The narrative was set as comparative discourse about India and China entered in all debates around economy and geopolitics. However, in the period that followed, China was more focused on building its own economy and positioning it into pre-eminence position. The focus was lesser on border disputes with India. There was no movement on India-US deal which largely remained on paper. The US Senate passed it in October 2008 into 123 Agreement. Unfortunately, global financial crisis unfolded following housing bubble bust in the US bringing down Lehman Brother which cause ripple effect globally. In India too economic began to falter. Economic growth decelerated in 2008-09 to 6.7 percent. This represented a decline of 2.1 percent from the average growth rate of 8.8 percent in the previous five years. The Reserve Bank of India (India’s central bank) swiftly responded by easing monetary policy and the government by introducing stimulus packages to boost demands. This calibrated response put GDP growth back on track to pre-crisis level and the economy as the fastest growing major economy after China. The world again took note of India. So did China.
The above background was necessary to grasp how India story was shaping up to elevate its global profile.
Just as in India the general election mood was occupying much of news space from middle of 2014, in China the change of guard took place as Xi Jinping was elected as President by National People’s Congress in March 2013. He immediately started flexing muscle against India with border incursions in next three successive years. But soon India was going to change. The political alliance of Bhratiya Janata Party (BJP) won general election with landslide majority and Narendra Modi assumed office of the Prime Minister. He immediately embarked upon extensive engagements with global leaders in terms of bilateral visits in his first term of five years. Under him, the diplomacy changed profoundly. From reactive to proactive and from defensive to aggressive. It moved away from its non-aligned posture since independence.
Then came the black swan event of the century – the Covid pandemic grinding the world to halt. Complete lockdown of economies around the world. The reports of the origin and spread of deadly virus from Wuhan in China to entire world changed the perception of China in the minds of global community. The over dependence on Chinese supply chain proved costly for world economy which remained severely disrupted for much of next two years. This realization caused governments and businesses around the world to mo e to China + 1 strategy for alternative supply chain. At the same time Xi Jinping started clamping down on global companies who had established units in China after its open economy policy. It became more and more unpredictable to do business in China. Its zero-covid policy crippled its economy and fault line started to appear in economy with burgeoning deficit to GDP ratio.
At the same time, India was becoming more and business friendly with economy robust and unlike China it was founded on strong fundamentals and not on deficit financing.
In the last decade under Modi, India has changed completely. The Indian image has been recognized, whether it is for the 3rd largest startup hub, innovation, space achievement, building world class infrastructure, yoga, pharmacy of the world, its vaccine diplomacy, talent pool of skilled youth, leading climate action in Paris and Glasgow, its aggressive posture against China during 2020 border clashes, its lifting of 250 million people from below poverty line, its role of solution provider in multilateral dialogues, and its impressive G20 presidency.
The fundamental change that the Prime Minister Modi brought was shifting the international political discourse and attracting global businesses to increasing look at India as alternative to China.
The first two terms of Modi government worked in financial inclusion, health insurance, electricity, gas, water, roads, toilets, food, houses and digitisation. The production-linked incentive (PLI) scheme was a great economic initiative that could transform India into export-oriented manufacturing hub and ideal destination for foreign companies looking for diversifying their production from a china’s increasing draconian rules. The world has also noticed with awe the technology advances India has made, the Unified Payments Interface (UPI) and Open Network for Digital Commerce (ONDC) are gaining global traction.
The PM Gati Shakti Master Plan (Speed with power) for providing multimodal connectivity to various economic zones is transformative. Economic Zones like textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fishing clusters, agri zones etc. are being mapped for integrated infrastructure planning and make Indian businesses more cost competitive. This will boost economic growth, attract foreign investments while de-risking investments by visualizing the connectivity, and enhance the country’s global competitiveness in export markets.
While China’s economy is slowing down, its population greying, the Indian economy is likely to achieve a growth rate of 7% in fiscal year 2025 after growing at or above 7% in 2023-24, driven by resilient domestic demand despite risks and uncertainties in the global economic landscape. More than 50% of India’s population below the age of 25 and more than 65% below the age of 35. It will continue to have this demographic dividend until 2050.
In next three years, Indian economy, which is 5th largest now, is likely to become the 3rd largest. The stock market and banking system are robust. The ease of doing business has improved drastically, FDI policy has been liberalized to allow 100% through automatic route, the invest climate has improved,
According to the World Investment Report 2023, India emerges as the FDI powerhouse and secures the third-highest foreign investment in 2021-22. The total amount of FDI inflows received during the last ten years (April 2014-September 2023) was US$ 629.58 billion. This FDI has come from more than 101 countries that have invested across 31 Union Territories and States and 57 sectors in the country.
Add to this the interim Union budget presented by the finance minister of India on February 1. It reflected the government commitment to accelerate efforts towards achieving developed nation status by 2047. It is remarkable that a big increase in capital outlay by 11% to around 150 billion USD and fund allocation of around 13 billion USD for work opportunities and employment generation has been done while adhering to fiscal discipline. This is more praiseworthy that the fiscal prudence was maintained even though this year being general election year when generally the government resorts reckless splurge on populism. Globally, investors were expecting that. Investors have recognized continued focus on fiscal sanctity, and it is reflected in global interest in doing business with India. India’s stock markets also reflect this enthusiasm. India’s markets recently overtook Hong Kong to become the world’s fourth largest with a valuation of $4.33 trillion.
Clearly, there is discernible shift in global narrative of India over China.
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