[Global Focus] "Move Aside China" India's Unstoppable Sprint

Modinomics Gains Momentum with Modi's Re-election
6-7% High Growth Expected Next Year
Large Young Workforce Among 1.4 Billion Population
Global Firms Leaving China Shift Production to India
'Buy India' Stock Market Cap Surpasses 4 Trillion
Growth Tripled Since 2020 Pandemic

India's economy is emerging as the most prominent market amid concerns of a global economic slowdown, continuing its rapid growth. This is due to the strong domestic demand driven by population growth and the influx of foreign investment, which are fueling the rapid expansion of the Indian economy. After suffering a severe economic downturn due to the COVID-19 pandemic, the Indian economy experienced a turnaround thanks to the strong stimulus measures implemented by the Narendra Modi government. In particular, if Prime Minister Modi succeeds in securing a third term in the general elections scheduled for the first half of next year, the so-called 'Modinomics' is expected to gain renewed momentum, leading to a rosy forecast of continued high growth in the 6-7% range next year. As the era of single hegemony centered on the United States comes to an end and emerging middle-income countries such as T?rkiye, Brazil, Saudi Arabia, and Indonesia gain strength, India is rising as a market replacing China, significantly increasing its presence in the global economy.

GDP Growth Rate Four Times That of Developed Countries... India Eyes the ‘Big 3’

According to the International Monetary Fund (IMF), India’s economy has recorded rapid growth with an average annual GDP growth rate of around 6% over the past decade. This year, it is expected to maintain a high growth rate of 6.5%, which is twice the global average (3%) and four times that of developed countries (1.5%). Experts from S&P Global and others predict that India, which has continued to grow since the economic reforms of 1991 and has risen to become the world’s fifth-largest economy, will surpass the second- and third-ranked countries, Japan and Germany, around 2030, closely trailing China. S&P Global forecasts India’s GDP growth rate to reach an average of 6.7% annually through 2031.

Arvind Panagariya, an American economist and professor at Columbia University, stated, "In dollar terms, India’s economy has grown at an average annual rate of 10.22% over the past decade, and if this trend continues, India’s GDP will reach $5 trillion in 2026 and $5.5 trillion in 2027." He further predicted, "As early as the end of 2026, India’s economic size will surpass Japan and Germany, becoming the third-largest economy globally after the United States and China." In fact, India’s GDP growth rate in the third quarter was 7.6%, significantly outpacing China’s 4.9%.

All these achievements have been realized since Prime Minister Modi took office in 2014. Modi’s ruling party, the Bharatiya Janata Party (BJP), recently secured a landslide victory in local elections across four states last week, bolstering the momentum of Modinomics as Modi aims for a third term in the general elections next year. Shumita Debshwar, Chief Economist for India at T.S. Lombard, commented on the recent midterm election results, saying, "The entire country is rallying behind his third term."

During Modi’s tenure, India’s GDP growth rate has propelled it past the United Kingdom to become the world’s fifth-largest economy. Although the economy suffered a sharp downturn due to the COVID-19 pandemic lockdowns, with key economic indicators such as exports, inflation, consumption, and production experiencing severe declines, strong stimulus measures and subsidy support, along with market-friendly policies, enabled a V-shaped recovery, returning the economy to its pre-pandemic growth trajectory. According to S&P Global, India’s manufacturing Purchasing Managers’ Index (PMI) for November stood at 56, significantly above 50 and indicating an expansion phase, the highest since July 2021 (55.3).

"Can't Do Business Without India"... Companies Turning Eyes from China to India

One of the major pillars of India’s steep economic growth is the change in its demographic structure. With a population of 1.4 billion, India has overtaken China as the world’s most populous country. India’s median age is 28-29 years, making it the country with the youngest workforce in Asia. The proportion of the working-age population under 65 is expected to rise slightly from 68% this year to 68.9% by 2033, a trend that contrasts with most countries where the working-age population ratio is declining.

With cheap labor and a vast consumer market, India is rapidly attracting global companies. The US-China conflict and the COVID-19 pandemic have accelerated the diversification of production bases away from China, leading to an increase in companies expanding production within India.

US semiconductor company Micron plans to establish a $2.7 billion semiconductor packaging plant in Gujarat, India, while Google has decided to open a global fintech (financial technology) operations center in the same region. Amazon Web Services (AWS), Amazon’s cloud division, plans to invest $26 billion in India by 2030.

According to the World Investment Report published by the United Nations Conference on Trade and Development (UNCTAD), India ranked third in greenfield investments?direct investments in production facilities or subsidiaries?after the United States and the United Kingdom. S&P Global noted, "India will be the fastest-growing economy in the world over the next decade and will become a key long-term growth market for global companies across all industries, including manufacturing, electronics, chemicals, banking, and insurance."

‘Buy India’ Boosts Indian Stock Market... Market Cap Surpasses $4 Trillion for the First Time

Expectations for the Indian economy are driving the stock market higher. Amid the global investors’ ‘Buy India’ trend, the market capitalization of the Indian stock market surpassed $4 trillion for the first time ever as of the closing on the 5th. This represents a threefold increase compared to the 2020 pandemic boom period, and it is the first time since the opening of India’s two major stock exchanges?the Bombay Stock Exchange and the National Stock Exchange of India?that the market cap has exceeded $4 trillion.

Earlier this year, the Indian stock market experienced a correction due to accounting fraud allegations against the Adani Group but began a strong upward trend from April onward. Key indices representing the Indian stock market, such as the BSE Sensex and Nifty 50, have risen 17% and 19%, respectively, since the beginning of the year. This marks eight consecutive years of annual gains.

While India’s major indices continue their upward trajectory, the Hong Kong Hang Seng Index has remained in negative territory compared to the start of the year. If this trend continues, it is expected that the Indian stock market will surpass the Hong Kong market faster than anticipated. The Hang Seng Index has fallen 19% this year alone due to the real estate market crisis and the impact of US-China tensions, leading to a mass exodus of foreign capital. The market cap gap between the Indian and Hong Kong stock markets has narrowed to about $700 billion, the smallest ever.

Foreign investors are also increasing their bets on India. As of the end of the third quarter, foreign investors had net purchased $15 billion in the Indian stock market. Net capital inflows into India have exceeded $20 billion. The influx of foreign capital leaving the Chinese market and moving into India is seen as a key factor sustaining the Indian stock market’s upward momentum. Bloomberg highlighted that India’s population surpassing 1.4 billion this year, making it the largest population country next year overtaking China, and the strengthened policy stability expected if Prime Minister Modi secures a third term, are attracting investors’ attention.

This content was produced with the assistance of AI translation services.