By Antonio Graceffo
Despite a number of structural disadvantages, India likely will rival China in terms of global power.
This year, India hosted the G-20 conference, which Indian leaders see as recognition that the nation has come of age and is ready to overtake China. India already has surpassed China in population and is hoping to eclipse China economically and militarily.
Over the past 10 years, India has averaged 5.5 percent growth, making it the world’s fastest-growing economy. For 2023, the International Monetary Fund anticipates that China and India will account for about half of global growth. Furthermore, India will grow at 6.3 percent this year and is expected to surpass Germany and Japan to become the world’s third-largest economy by 2027.
In recent years, India has benefited from outsourcing, absorbing relocated work from other countries, thus becoming the world’s back office. Administrative work and manufacturing are flowing into India, with manufacturing expected to increase to 21 percent of gross domestic product (GDP) by 2031 from its current share of 15.6 percent. Over the next 10 years, as more work is exported to India, income distribution within the country is expected to become more equal. At the same time, consumption could double.
Compared to China, India has a number of advantages, such as high penetration of the English language and a young population. The median age in China is 38.4, compared to 28.7 in India. China’s birth rate is 12.1 per 1,000 people, while India’s is 18.7. On the other hand, China is much richer now, and despite having a youth unemployment rate of 20.8 percent, China can still offer good opportunities for its young people. China’s economy is still about five times the size of India’s, and the average Chinese is much richer, with an income of $13,000 a year, compared to India’s $2,500. Currently, for Indians to enter the top 10 percent in terms of income, they only need to make $300 per month.
Because of the higher wages in China, coupled with the deteriorating global sentiment, the country has become a less attractive option for high-end manufacturing. India stands ready to absorb relocated firms and diverted investment. However, India lags China in infrastructure development. New Delhi has quintupled its infrastructure investment since Prime Minister Narendra Modi came to power nine years ago, but the country still has a long way to go. China is already equipped with reliable logistical networks, electrical grids, roadways, railways, and seaports, while India is just creating such systems now.
To complete its economic transition and avoid youth underemployment, India will have to create 90 million jobs outside of the agricultural sector by 2030. One hope in this area is that India has done better than China at transitioning to service sector jobs, providing high-end services to foreign countries. A growing service sector helps to create jobs for the nearly 7 million young people who graduate from Indian universities each year. These jobs are higher paying than manufacturing jobs and contribute more to GDP. The only question is how many jobs will be added and how quickly.
An issue faced by both countries is uneven economic development across geographic regions. Conflicts between ethnic and religious groups in India are more pronounced than similar problems in China. While India was hosting the G-20, violence erupted between Hindus and Muslims, underscoring a potential for civil unrest, which isn’t present in China. Furthermore, unlike Beijing’s central planning, New Delhi’s pluralist democratic tradition is less effective at implementing dramatic, nationwide changes.
India is now fourth in military strength, behind the United States, Russia, and China, according to a report by GlobalFirepower. Until 2020, a war between India and China seemed only a remote possibility. Since fighting broke out between the People’s Liberation Army (PLA) and the Indian Army in the Indian territory of Ladakh, war has become a very real possibility.
Over the past 10 years, India’s defense spending has doubled. This year, India’s defense budget has increased by an additional 10 percent, placing the country in third position globally in defense spending. India’s navy, in particular, is struggling to modernize to face an increasing threat from the PLA in the Indian Ocean. Currently, the PLA Navy uses ports in Burma (also known as Myanmar), Sri Lanka, and Bangladesh, encircling the Bay of Bengal.
In 2020, the United States and India signed the Basic Exchange and Cooperation Agreement on Geospatial Cooperation (BECA), which calls for sharing of defense-critical topographical and aeronautical data between the two countries. After the Ladakh clashes, then-U.S. Secretary of State Mike Pompeo said, “The United States will stand with the people of India as they confront threats to their freedom and sovereignty.”
India and the United States are both members of the Quadrilateral Security Dialogue (the Quad), a security grouping oriented toward the threat posed by the Chinese Communist Party (CCP). Other defense-related agreements between the United States and India include Major Defense Partner status, the Defense Technology and Trade Initiative, the Logistics Exchange Memorandum of Agreement, the Communications Compatibility and Security Agreement, and the Industrial Security Annex.
New Delhi has a number of geopolitical advantages over Beijing. In addition to being a member of the Quad, India is also a member of the G-20 and the British Commonwealth. India heads up several regional economic groupings and has a strategic partnership with the Association of Southeast Asian Nations. Increasingly, India is seen as the leader of the developing world and a gateway to the global south for developed countries.
As India plays a growing role in geopolitics, China is increasingly becoming marginalized. The CCP is building a coalition of pariah states such as Russia, Iran, and Afghanistan. On the other hand, New Delhi’s close ties with Moscow have been a sticking point in India completely aligning itself with a U.S.-led world order.
While China’s economy is slowing and its geopolitical position is weakening, India is rising. Although it would be difficult to predict when or if India will surpass China, it’s clear that India will play a more crucial role in the global balance of power.
