By Phapano Phasha and Zakhele Madela
“Global analysts have declared India as the next great economic superpower.”. Currently the fifth largest economy in the world, projected to take over Germany and Japan, is the rise of India “inevitable”?
This growth and confidence in India has surpassed all expectations, particularly since India continues to defy G7 countries and Western powers as the country continues to trade with Russia, thus refusing to join sanctions and embargoes against the Kremlin by the Global North.
This diplomatic prowess by India, which enables it to maintain strategic relations with countries and companies in the Global North while being a big brother to Russia, can also be linked directly to its independence in 1947, followed by its position in 1948 at the United Nations (UN), where India became the first country in the UN to raise the issue of racial discrimination against black people in South Africa.
Consequently, India managed to wrap up 2024 in style despite all these global contradictions and as an envy of countries in the Global South, with strong economic returns and forecasts by global analysts for 2025 and the future.
The country has seen phenomenal rise in the last 10 years from the time when it embarked on a very clear direct Make in India strategy to put it on the world map. The country led by its prime minister, Narendra Modi, didn’t just end there; it embarked on economic reforms that would attract the world’s attention.
It is said that India’s share in global trade has doubled since 2005, comparatively moderated in the last 10 years from when it declared the Make in India in 2014.
- Twenty Years of Phenomenal Growth: In overall aspects, India’s share in global trade has doubled over the past 20 years. The country has seen significant growth in both exports and imports. Government initiatives like Make in India and the production-linked incentive scheme, along with robust trade agreements, have driven this increase. Services exports have shown better performance compared to goods exports.
- India Contribution to Global Trade: India’s Make in India and New Economic Reforms has seen its global trade growth doubling in the last two decades. Its share of exports and imports is also said to have doubled over this period. According to Martin Wolf of the Financial Times, India's purchasing power will be 30% larger than that of the US in 2050; some pundits even suggest this rise could come sooner than later. These reports show that India’s share in global merchandise exports rose from 0.9% in 2005 to 1.8% in 2023. Services exports more than doubled from 2% to 4.3%.
- *Solid 20 Years of Growth: Even though India has experienced phenomenal growth in the last 10 years, its overall export share has been steadily growing from 1.2% in 2005 to 2.4% in 2024. Factors that have driven this growth are robust trade agreements with leading economies of the world and an aggressive, diversified export portfolio that is embedded in the main Make in India growth strategy.
- India’s Services Industry Versus Manufacturing Industry: India has meticulously set and positioned itself as a centre of attention for the world’s best performance in services exports that are better than goods. Hence, India is ranked 16th globally in merchandise exports and the seventh in services exports. On the same footing, India’s share of imports at a global level also witnessed an increase. Merchandise imports rose from 1.3% in 2005 to 2.8% in 2023, while service imports increased from 2.4% to 3.4%. Overall, India’s share in global imports grew from 1.5% to 2.9% during this period.
- What Exactly is Behind India’s Growth in the Services Industry? The growth has been driven mainly by factors like multilateral and bilateral trade agreements, initiatives like Make in India and Production-Linked Incentive (PLI) schemes, diversification of export baskets, and development of logistics infrastructure. Services exports too moderated but sustained a higher CAGR of 8.4% in the last decade, reflecting India’s comparative advantage in sectors like IT, financial, and consulting services.
- Comparative Advantages of India: India holds a Relative Comparative Advantage (RCA) in key sectors such as agriculture, textiles, chemicals, and pharmaceuticals. However, the country lags in machinery, transport equipment, and electronics, indicating areas for further development.
- *The Wrap of 20 Years of Phenomenal Growth: The last 10 years have seen India’s global trade dynamics grow over the past two decades. This was against China’s share in global merchandise exports increasing significantly, largely at the expense of traditional export leaders like Japan, Germany, France, the UK, and the USA. In services, India and Singapore improved their shares, while the USA experienced a decline. These are despite the global merchandise exports having shifted towards China, largely at the expense of Japan, Germany, France, the UK, and the USA.
India has no doubt seen incredible growth in the last 10 years. But 2024 has basically been the year to consolidate the growth plans that were hatched 20 years and 10 years ago with clear strategic intents that were well executed by Modi’s leadership teams.
The world will surely be watching with great admiration inside India’s unapologetic economic reforms.
* Phapano Phasha is chairperson of The Centre for Alternative Political and Economic Thought, with a focus on BRICS+ countries and the Global South. Zakhele Madela is an energy industry analyst with 26 years experience. He holds a degree in engineering. He is chairman of the Economic Intervention Forum of South Africa (EIFSA). The views expressed here are their own.