India's Rise: A New Chapter Unfolds in the Asian Century
The 21st century has witnessed the inexorable transfer of power and influence in Asia, embodied by the re-emergence of behemoths China and India. While China’s global imprint is established, India’s rise as a credible challenger warrants scrutiny. With the successful conclusion of India’s G20 presidency, the time is opportune to examine its growing stature in global affairs.
This simple editorial explores India’s emergence as a formidable counterweight to China, powered by adroit diplomacy, technology ascendancy, and untapped economic potential. Despite enduring challenges, India seems destined to forge its own development path, harnessing demographic dividends
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India’s Diplomatic Influence
India’s expanding diplomatic clout has been instrumental in its growing authority. Its regional diplomacy has strengthened ties with key neighbours like Bangladesh, Bhutan, Sri Lanka, and the Maldives through targeted development aid and investment
?Even more impressive is India’s pragmatic handling of complex relationships
India has also revived relations with Nepal following a period of estrangement, with high-level bilateral agreements that have given ties a firmer footing. Additionally, in countries like Bangladesh where China made early inroads, India has reasserted itself by leveraging historical and cultural linkages
These diplomatic successes have enabled India to counter China’s regional influence. As Sino-Indian jockeying intensifies, India’s web of regional alliances and partnerships will prove ever more consequential. Maintaining a prudent mix of hard and soft power policies remains vital to fulfilling the projected ‘Asian Century’, guided by cooperation and mutual growth.
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India’s Technological Prowess
Apart from diplomacy, technology and economic promise are powering India’s ascent. Its vibrant start-up ecosystem and research capabilities have birthed innovative flagships like IdeaForge, a leading drone manufacturer that epitomises India’s potential to rival China as an emerging innovation hub and high-tech producer.
Broader policies to transform India into a global drone powerhouse by 2030 are paying dividends. Relaxed regulations and manufacturing incentives have spurred market expansion, projected to exceed $23 billion USD, India’s drone push leverages inherent advantages – engineering talent, low costs, and massive commercial demand. It also taps into the global drone boom across sectors like agriculture, infrastructure, logistics, and defence.
Drones and Robotics underscore the promise of India’s burgeoning technology landscape spanning IT services, pharmaceuticals, and manufacturing. India already leads globally in IT services through giants like Tata Consultancy Services (TCS) and Infosys. Now it is climbing the value chain into futuristic domains like Artificial Intelligence (AI), cloud computing, and analytics.
Pharmaceuticals represent another competitive bastion, with India cementing its reputation as ‘the world’s pharmacy’ during COVID through its vaccine production efforts. Concurrently, India is betting aggressively on manufacturing, with the ‘Make in India’ initiative aiming for 25% GDP contribution from the sector.
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Can India Surpass China?
China’s rapid economic ascent over the past four decades is unprecedented in modern history. Since initiating market reforms in 1978, China has become an industrial juggernaut and the world’s second-largest economy. However, India, with over 1.3 billion people and an increasingly open, dynamic economy, poses a potential challenger to China’s dominance in Asia.
India boasts tremendously favourable demographic trends that could prove to be rocket propellant for economic growth. With a median age of just 28 years, India has a very youthful population compared to China’s median age of 38. Over 110 million people are expected to enter India’s working-age population between 2023 and 2030. By 2030, close to one-fifth of the world’s total working-age population will be Indian. No other country comes close to matching India’s pace of new labour force entrants.
This expanding pool of working-age Indians coinciding with declining dependency ratios can catalyse a substantial demographic dividend. With more workers relative to dependents, India can boost productivity, savings, investment, and economic growth. Demographics alone could contribute between 1.0-1.5% to India’s annual GDP growth based on increased labour inputs.
Beyond sheer demographics, India has several other ingredients supporting its economic promise. Ongoing urbanisation, as the population shift from rural areas to cities continues, will enable productivity gains as workers transition to more efficient non-farm employment. Gradually formalising India’s massive informal economy, which employs 90% of Indian workers today, can also harness unrealised economic potential – likewise, initiatives to upgrade the skills and employability of India’s labour force through vocational programs and technology access can help reap the benefits of the demographic dividend.
With the right policy choices and reforms, these demographic and structural advantages could potentially help India achieve 9-10% GDP growth in the decade ahead. At this robust pace, India would emerge as the world’s third-largest economy by 2030, surpassing Japan and Germany based on GDP measured at market exchange rates. India already ranks third when GDP is adjusted for purchasing power parity.
The confluence of a youthful populace, rapid urbanisation, and formalising economy provides tailwinds for technology-led growth. Ambitious reforms to infrastructure, labour regulations, and bureaucratic processes can help maximise India’s potential.
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Overcoming Development Obstacles
While India’s economic promise appears bright, some obstacles stand in the way of this potential being fully realised. India’s infrastructure, whether roads, ports, power, or railways, remains inadequate to support rapid growth. Major investments, especially in power and transport, are required, with estimates that infrastructure spending may need to rise from 5% to 7-8% of GDP. The energy sector is also plagued by high costs and financial losses, while land acquisition has been a thorny issue, underscoring the need for dedicated special economic zones while regulations are streamlined.
Beyond infrastructure, developing India’s manufacturing capabilities is another key priority. Its 17% share of GDP lags most major economies. The government aims to raise this to 25% of GDP to create jobs for the expanding labour force, but so far, the ‘Make in India’ initiative has struggled to attract major foreign manufacturers beyond automotive firms. Restrictive labour laws, red tape, high logistics costs, and limited competition inhibit progress.
Implementing further reforms also remains a challenge despite India making substantial strides in easing regulations and procedures in recent years. Its ‘World Bank – Ease of Doing Business Index’ ranking, while rising swiftly, still lingers at 63rd globally. Tackling cronyism, rationalising agricultural policies, consolidating state-owned firms, and attracting more foreign investment remain ongoing aims. The pace and depth of reforms will need to accelerate for India to maximise its opportunities.
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Financial Market Reforms to Propel Growth
Financial market reforms could potentially serve as a catalyst to propel India’s growth. The government has taken steps to gradually open capital markets to foreign investors, however, quotas and restrictions still exist in several areas like bonds and insurance. Further relaxing limits on foreign direct and portfolio investment would help attract crucial financing needed for infrastructure and corporate investment.
Reforms are also needed to deepen India’s corporate bond market, dominated by government securities. Boosting corporate bond issuance can complement bank lending as a funding channel, while developing an international Masala bond market for Indian issuers would facilitate tapping offshore capital.
Equity market reforms should focus on easing listing procedures
As India develops into an Asian manufacturing hub amid shifting global supply chains, capital inflows should accelerate, providing an upward trajectory for the value of the rupee.
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E-Commerce and IT Services: Areas of Competitive Advantage
Within the economy, India already possesses competitive advantages in sectors like e-commerce and IT services.
India’s e-commerce market potential is vast given rising consumer incomes and internet penetration rates that still sit below 50%. The market is projected to grow at a 17% CAGR through 2030, potentially surpassing $350 billion USD in size. Homegrown platforms like Flipkart as well as global giants like Amazon are aggressively competing for market share.
Likewise, India a global leader in IT services, leveraging cost efficiencies and English language proficiency. As wage arbitrage advantages begin to taper off, the IT industry will need to pivot towards more value-added offerings around data analytics, cloud computing, and AI, but the foundations are in place for India to move up the IT services value chain, supporting sustained growth and competitiveness.
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Strategic Space Program Cements Global Prominence
India’s strategic space program has become a towering symbol of its scientific prowess and technical capabilities. This was highlighted by the recent Chandrayaan-3 lunar mission, making India the first nation to successfully reach the Moon’s south pole. India is also preparing its first manned Gaganyaan mission to low earth orbit, scheduled for 2024.
These feats have been achieved cost-effectively, with India’s $1.6 billion USD space budget a fraction of other space powers. Policies to boost private sector participation are paying dividends through entities like NewSpace India Limited (NSIL) and the Indian National Space Promotion and Authorisation Centre (IN-SPACe). Their goal is to harness India’s engineering talent and frugal innovation for the growing commercial space economy.
India aims to become a global hub for affordable satellite launch services and space exploration. It seeks to capture a greater share of the $1 trillion USD, forecasted 2040 global space economy. Partnerships with the U.S., including the Artemis Accords, will provide investment and technical know-how to aid this goal.
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India promises to not only fill the void left by a fading Russia but far exceed its contributions through smart innovation and commercial space leadership. With over 100 spacecraft launches and a string of interplanetary missions under its belt, India’s space program stands poised for a new era of rapid growth and global impact.
Additional Promising Sectors
Beyond e-commerce and IT, India boasts other promising sectors that play to its strengths:
Pharmaceuticals: India is the world’s 3rd largest pharmaceutical producer by volume, benefiting from a large science talent pool and low costs. COVID-19 vaccine production has highlighted India’s manufacturing value proposition, while medical tourism also holds potential.
Auto/Trucks: India is the 4th largest auto market globally. Commercial vehicle exports are substantial with competitive labour costs, with market leader Tata Motors generating the most profits overseas.
Textiles: Skilled labour and cotton production help make India one of the world’s largest textile exporters with over 45 million workers employed in the sector.
Business services: Accounting, legal services, and other outsourcing industries leverage India’s talent pool.
Comparison to China
China’s economic ascent since 1978 was powered by massive investment, exports, and rapid industrialisation, following the East Asian development model. This lifted 800 million people out of poverty, but also led to severe environmental degradation.
India is unlikely to follow China’s export-driven strategy – given stiffer global competition today, India’s growth will rely more on domestic consumption and services, playing to its strengths, even though manufacturing will remain a priority.
Realistically, it will take India decades to challenge China’s economic size and influence. Based on current projections, India would need to grow at 10% annually for the next 50 years to match China’s GDP size today. However, India does not need to eclipse China to be considered a success story – its strategic location, soft power, and global partnerships shore up its formidable stature. As the world's largest democracy, India offers a socially conscious alternative to China's top-down capitalist model.
India seems intent on charting its own pragmatic developmental course leveraging domestic consumption and services, rather than pure export-led growth. While progress may be steady, sustaining 6-8% annual GDP growth could profoundly expand India's economy and global influence.
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?A Resurgent Nation
India boasts tremendous economic potential driven by favourable demographics, rapid digitisation, and rising global stature, however achieving sustained high growth requires concerted efforts to fix infrastructure gaps, create manufacturing jobs, and implement pro-business reforms.
Financial market opening and innovation can accelerate India’s development, but some final frontiers around land, labour, and bureaucracy may be the hardest reforms of all. While India is unlikely to surpass China outright, it is poised to emerge as a formidable economic counterweight anchored by consumer demand and services. For investors, India offers a rare opportunity to tap into the invigorating growth story of a one billion-plus population market coming into its own.
As India continues to solidify its presence in South Asia, nurture its tech sector, and diversify its manufacturing capabilities, it is poised to become a significant competitor to China. The world should closely watch India’s trajectory, for it may well hold the key to the future of Asia’s geopolitics.
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While challenges persist, India’s ascent is marked by promise and potential. With its momentous G20 presidency, India has showcased its strengths: diplomatic agility, innovation, and strategic pragmatism. Its emergence as a resilient economic power and democratic counterweight promises to shape Asia's strategic landscape for years to come. While challenges remain, India's ascent appears inexorable.
?India has set its sights on becoming a developed nation by 2047, which would mark the 100th anniversary of its independence. Its youthful and diverse populace, aided by digital transformation, stand poised to make this dream a reality.
The 21st century belongs to Asia, with India’s ascent a defining chapter in the story. As the world adjusts to the shifting balance of power, India’s rise shines as a beacon of opportunity and hope. Its embrace of partnerships, innovation, and economic vibrancy paints the picture of a nation on the cusp of greatness.
As India strides confidently onto the global stage, it brings wisdom, enterprise, and promise. By channelling its ancient values and future ambitions, India lights the path towards a more just and equitable world order.
Carl Cagliarini
Author
With over 25 years of experience, I have merged special operations with high-value commercial technology. In leadership roles across public and private sectors, I have navigated key milestones from early Wi-Fi adoption to spearheading laser communications programs and rescue and restructure of failing companies. My journey stands out through deep technical aviation and autonomy expertise, demystifying complex narratives with humility. Moreover, I have harnessed AI and machine learning, sharing my experiences as an early adopter.
Bridging defence and commercial realms, I underscore innovation's impact on security and progress. Amidst challenges, unwavering action and teamwork are essential.
From state security to driving commercial innovation, I operate on universal principles. Collaborating with capable teams, I have rescued investments and orchestrated solutions for significant returns.
Looking ahead, my dedication focuses on driving defence and humanitarian innovation, nurturing collaboration and advancing progress. Over the next quarter-century, my mission is to reshape defence outcomes and more by nurturing a future rooted in humility, innovation, teamwork, impactful change, and unwavering action, including dismantling barriers that hinder innovation.
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About Artemis
At Artemis, our team of designers, scientists, writers, engineers, and visionaries shares a passion for pioneering innovation. With backgrounds spanning academia, national defence, broadband connectivity and media narratives, our members bring relevant diverse expertise while being united by a drive to push boundaries and deliver what is required and on time.
We actively pursue innovation rather than passively embrace it. Collaborating with industry leaders and visionary founders on their most complex challenges inspires us. We especially relish the opportunity to immerse ourselves in projects that excite our curiosity. In addition, we continuously cultivate novel ideas and develop technologies to advance humanity.
Our diversity and dedication are the foundations of our success.
When bright minds from different disciplines come together around a shared purpose, the results can be extraordinary. We have witnessed this first hand, again and again. Our commitment to each other and to making a difference motivates us.
If you have a goal that seems unfeasible, a challenge that appears insurmountable, or a vision that looks impossible, let's connect. With our relentless determination, we will work tirelessly to accomplish what others may deem unachievable. The only limit is what we can conceive - and we specialise in turning inconceivable ideas into reality.
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