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On the 75th anniversary of India’s independence from British rule, Prime Minister Narendra Modi called for the nation to “dominate the world.” India’s growing role in the global economy is becoming increasingly impossible to ignore. In April, it surpassed China as the most populous country in the world. The International Monetary Fund (IMF) predicts that India’s economy will grow by over 6% this year, and investors are increasingly viewing it as a viable alternative to China. On the occasion of India’s 76th Independence Day, it is worth reflecting on the progress made since Modi’s rallying cry, which reveals both the positive and negative aspects of the country’s newfound assertiveness.
This year, there has been a surge of optimism surrounding India’s economy. Its stock market has experienced significant growth as foreign investors buy into its narrative of national progress. Multinational companies have shown interest in shifting their manufacturing operations to India as part of their diversification strategies, particularly due to escalating tensions between the United States and China. The government has also played a role in fostering this optimism. In its budget in February, it committed to increasing capital spending by one-third, building on promising investments in transportation infrastructure and renewable energy.
However, this surge of positivity has also highlighted India’s economic limitations. The Adani Group, led by Indian billionaire Gautam Adani, who has close ties to Modi, faced accusations of stock manipulation and accounting fraud by the short seller Hindenburg. Adani denies all allegations. This incident serves as a reminder of India’s ongoing issues with weak corporate governance and the government’s support of industrial conglomerates. Investors remain cautious about the business environment, as foreign direct investment inflows declined for the first time in a decade during the last fiscal year.
Under Modi’s Hindu nationalist Bharatiya Janata Party, democratic values have suffered. Press freedoms have declined across the country, and political opponents have faced suppression. In March, Rahul Gandhi, the leader of the Congress party, was sentenced to two years in prison for making defamatory remarks about the prime minister. The conviction was later suspended. Additionally, there has been an alarming increase in targeted attacks against religious minorities, including Muslims and Christians, as outlined in a recent report by the US State Department.
If India wants to capitalize on its economic advantages, significant changes are necessary. First, it must embrace domestic and international competition, shifting away from its support of national champions and building trust in its regulatory institutions while abandoning protectionist tendencies. The “Make in India” initiative, which imposes tariffs on foreign components to promote the growth of domestic supply chains, has made relocation to India less appealing. Next, India must invest in its people. With roughly one-fifth of the world’s population and a large number of illiterate adults, increased spending on skills and education is essential to harnessing the potential of its young demographic. Finally, Modi must reverse the country’s descent into illiberalism. Social unrest and a weak rule of law hinder sustainable growth.
Since announcing a series of market reforms in 1991 that opened up India’s economy to the world, expectations have been high. Poverty has decreased, a middle class has emerged, and the country’s low-cost and youthful workforce has expanded. However, India has often fallen short of these expectations. Without reforms and a commitment to democratic values, the momentum will stagnate, and the Indian economy will experience another false dawn.
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