World Economy Lags, India Shines as a Prominent Exception
India is on a remarkable trajectory towards becoming the third-largest global economy by 2028, surpassing Germany and Japan. With a projected GDP of over $4.75 trillion, this growth is driven by robust macroeconomic fundamentals, significant policy reforms, and growth in key sectors.
The Indian government's strategic initiatives in infrastructure, trade, and federal collaboration have been the main drivers of this growth. Central government capital expenditure has doubled in the last decade, leading to marked improvements in infrastructure such as a 60% increase in highways, doubling of airports, and fourfold expansion of metro systems.
Effective fiscal federalism has also played a crucial role. Strong collaboration between central and state governments has fostered competitive and favorable policy environments, attracting investments and boosting sectors like energy, water, and urban development, which are critical to sustaining economic growth and increasing per capita income.
Proactive government policies have also contributed to consistent GDP growth of 6.4–7% per year. Measures to ease inflation, encourage consumer demand, and promote participation in global trade have been instrumental in this growth.
India's growth is not limited to the national level. Several Indian states such as Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh, and Karnataka are projected to become trillion-dollar economies themselves by 2035, indicating the distributed nature of this growth across regions.
Key sectors driving India's growth are manufacturing and export industries, technology and digital innovation, services, and infrastructure development. India is emerging as a global manufacturing hub, underpinned by competitive federalism and infrastructure improvements. The digital economy, including fintech, edtech, and clean energy, is experiencing exponential growth, fueled by a young, entrepreneurial population.
The robust service sector, boosted by increasing domestic demand and technological adoption, plays a critical role in current and projected growth. Massive expansion in transportation and urban infrastructure supports broader economic activity and connectivity.
Despite challenges such as geopolitical risks and supply chain disruptions, India remains optimistic about its future. The government's capital expenditure outlay of $176 billion in the first-half of FY25 underscores this growth-focused approach.
India's total goods and service exports surged by 76 percent over the past decade, touching $825 billion in FY25. This growth has been supported by robust domestic and international demand, leading to sharp increases in manufacturing output and new orders, and a record rise in employment as firms expanded their workforce to meet rising workloads.
The IT-Business Process Management (BPM) sector in India is projected to reach $210 billion in exports, and the public cloud services market is expected to reach $17.8 billion by 2027. These sectors are expected to provide employment opportunities to millions of people and add billions to India's GDP.
In conclusion, strategic government initiatives in infrastructure, trade, and federal collaboration, combined with growth in manufacturing, technology, and services, are the main drivers of India's projected rise to the third-largest economy by 2028. However, continued vigilance is required to overcome potential threats such as geopolitical risks and supply chain disruptions.
Sources: [1] World Bank (2023). India Development Update, 2023. Washington, DC: World Bank Group. [2] NITI Aayog (2023). India's New Economic Vision 2035. New Delhi: NITI Aayog. [3] Reserve Bank of India (2023). Report on Trend and Progress of the Indian Economy, 2022-2023. Mumbai: Reserve Bank of India. [4] Ministry of Finance, Government of India (2023). Economic Survey, 2022-2023. New Delhi: Ministry of Finance.
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