When searching through my files for information and facts to prepare a presentation on India, I came across an old newspaper commentary I had written more than two decades ago after a visit to China. This commentary was published in the Asia Times, where I compared India and China.
Among other points, I highlighted China’s pragmatic approach to processes like visa issuance versus India’s bureaucratic red tape and cumbersome procedures. I noted that China attracted Foreign Direct Investment (FDI) of $52.7 billion in 2002, while India managed to secure only $3.5bn during the same year.
Since then, much has changed. In 2023–24, India attracted $28bn in FDI, an eightfold increase over 22 years. By comparison, China’s FDI stood at $163bn in the same period, representing a threefold increase. Although India still lags behind, the gap has notably narrowed.
It is important to remember that China began its economic reforms in 1978, following Deng Xiaoping’s "to get rich is glorious" policy. India initiated its reforms much later, in 1991, under the leadership of Prime Minister P V Narasimha Rao, with Manmohan Singh as Finance Minister.
Successive governments under Atal Bihari Vajpayee(1998–2004) and later Manmohan Singh (2004–2014), as prime ministers, contributed to advancing these reforms. However, both were built upon the foundation laid in the early 1990s.
Since Prime Minister Narendra Modi took office in 2014, the pace of economic reforms has accelerated.
Today, India is the fastest-growing large economy in the world, expanding at a rate of 7.2% -- a remarkable achievement. India is currently the fifth-largest economy globally, following the United States, China, Germany, and Japan.
By 2027, India is projected to climb to the third position. It is already the third-largest economy in purchasing power parity (PPP) terms. India’s foreign exchange reserves touched an all-time high of $670.1bn in early August 2024.
Looking ahead, India is poised to become a $26tn economy by 2047, the year it celebrates its 100th anniversary of independence, with a projected per capita GDP of $15,000, according to Ernst & Young.
An even more optimistic forecast by Krishnamurthy Subramanian, a student of Raghuram Rajan at Chicago University, a former member of Prime Minister Modi’s Council of Economic Advisers and now the Executive Director of the International Monetary Fund (IMF), envisions India as a $55 trillion economy by 2047.
What explains India’s continued economic growth?
India faces stark income inequality, ranking as the second most unequal country after Brazil in terms of the Gini coefficient, a measure of income disparity.
However, it has also made significant strides in reducing extreme poverty, much like China. The percentage of India’s population living on less than $2.25 per day (a World Bank metric for extreme poverty) has dropped to 2% or less, down from 12% in recent years. In comparison, extreme poverty in China is an almost negligible 0.11%.
India’s growth story has not ignored the poorest sections of society. Prime Minister Modi’s Direct Benefit Transfer (DBT) scheme, using the Aadhaar card as a foundation, has been remarkably successful.
Financial inclusion -- bringing the poor and marginalized into the banking system -- has ensured better utilization of resources. Money saved under a pillow is idle, but money deposited in banks becomes capital for investment, driving economic growth.
The Aadhaar card, with its multiple functionalities, has played a crucial role in financial inclusion and taxation. A significant number of Indians are now taxpayers. The roots of this initiative trace back to Prime Minister Manmohan Singh’s tenure, when he enlisted Nandan Nilekani, co-founder of Infosys and a Bombay IIT -trained electrical engineer to lead the project.
India’s banking sector also underwent transformative reforms under Raghuram Rajan, a Chicago University economist and former Governor of the Reserve Bank of India (RBI). Rajan implemented key policy changes and strengthened the banking system. Although Prime Minister Modi’s government replaced Rajan, it did not reverse these policies. This policy continuity has been a cornerstone of India’s sustained economic growth.
Despite political rivalries, Modi and the Bharatiya Janata Party (BJP) have acknowledged the contributions of the founding leaders. While critical of the Congress Party, Modi has not sought to renounce Mahatma Gandhi as the founding leader of the nation.
During Chinese President Xi Jinping's three-day state visit to India in September 2014, Indian Prime Minister Narendra Modi took him to the Sabarmati Ashram in Ahmedabad, Gujarat. The Sabarmati Ashram is a historic site associated with Mahatma Gandhi, who led India's nonviolent struggle for independence.
Surely, this was an important move in cultural diplomacy. By visiting the Sabarmati Ashram, Prime Minister Modi aimed to showcase India's heritage and the enduring values of peace and nonviolence represented by Mahatma Gandhi. It was a way of emphasizing the shared commitment to peaceful coexistence and dialogue.
This visit was part of broader efforts to build a personal rapport between the two leaders and strengthen India-China relations at a time when economic and geopolitical cooperation was a key priority.
The visit to Sabarmati Ashram was also full of symbolism. Highlighting Gandhi's principles of harmony and peaceful resistance was a strategic message in the context of complex India-China relations, marked by both cooperation and conflict. The visit also demonstrated India’s steadfastness in honouring its founding leader, emphasizing that a nation without an anchor risks drifting toward its own peril.
Habibul Haque Khondker is a sociologist and columnist.
