India’s economy and elections: Is the hype around Narendra Modi’s vision justified?

New Delhi/London
CNN
—

in In a few days, India will start the world’s largest project Democratic elections.

About 960 million people in a country with a population of 1.4 billion are eligible to vote in the elections, which begin on Friday and take more than a month to complete. Narendra Modi is widely expected to win a rare third consecutive five-year term as prime minister.

Under his leadership, India is poised to become an economic powerhouse of the 21st century, offering tremendous opportunity A real alternative To China for investors, growth-seeking consumer brands and manufacturers looking to reduce risks in their supply chains.

While relations between Beijing and the West have become increasingly tense, India has healthy relations with most major economies and is aggressively seeking to attract large companies to set up factories in the country.

So is the hype surrounding Modi’s India, which remains a largely poor country, justified?

The quality of economic data in India can be unreliable, making it difficult to assess the ground reality in the world’s most populous country.

But using data from official or reliable sources, CNN has created five graphs to show how the country has fared since Modi first came to power in 2014, and to look ahead to the challenges the next leader will face in running the world’s fastest-growing major corporations. Economy.

India’s economy It was valued at $3.7 trillion in 2023, making it the world’s fifth-largest company, having jumped four places in the rankings during Modi’s decade in office.

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The South Asian giant’s economy is comfortably positioned to expand at an annual rate of at least 6% in the next few years, but analysts say it should expand at an annual rate of at least 6% in the next few years. To target growth 8% or more If it wants to become a major economic power.

Sustained expansion could push India into the ranks of the world’s largest economies, with some observers predicting that the country will rank third behind only the United States and China by 2027.

However, India can do much more to raise its GDP per capita, a measure of living standards by which India ranks low. 147 in 2022, according to the World Bank.

According to Guido Cozzi, professor of macroeconomics at the University of St. Gallen in Switzerland, there will be “per capita GDP effects” as the economy grows. But he warned that “trickle-down economics is not guaranteed to reduce income inequality, and that policies that promote inclusive growth may be necessary.”

As much as Just as China did more than three decades ago, India has begun a massive infrastructure transformation by spending billions on building roads, ports, airports and railways. At the same time, private investors are building The largest green power plant in the world.

In the federation this year In the budget alone, $134 billion was allocated for capital spending to promote economic expansion.

The results can be seen on the ground with furious construction work taking place across the country. India has added nearly 55,000 kilometers (about 35,000 miles) to its national highway network, a 60% increase in total length, between 2014 and 2023. Infrastructure development brings many benefits to the economy, including job creation and improved ease of doing business. .

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In recent years, the country has also built a range of technology platforms – known as digital public infrastructure — That turned Life and business.

For example, Aadhar programme, launched in 2009, provided millions of Indians with proof of identity for the first time ever. The world’s largest biometric database has also helped the government save millions by reducing corruption in social welfare initiatives.

Another platform, Unified Payments Interface (UPI), allows users to make payments instantly by scanning a QR code. It has been embraced by Indians from all walks of life, from café owners to… BeggarsIt allowed millions of dollars to flow into the formal economy.

In September 2023, citing a World Bank report, Modi said He said That thanks to digital public infrastructure, “India achieved its financial inclusion goals in just six years, which would have taken at least 47 years otherwise.”

Excitement about India’s growth potential is reflected in the stock market, Which reached record levels. The value of companies listed on Indian stock exchanges exceeded $4 trillion late last year.

India has two major stock exchanges: the National Stock Exchange of India (NSE) and the BSE, the oldest stock exchange in Asia and formerly known as the Bombay Stock Exchange.

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thanks for the Sizzling Data from the World Federation of Stock Exchanges last January showed that the NSE had overtaken the Shenzhen Stock Exchange and the Hong Kong Stock Exchange to become the sixth largest stock exchange in the world.

Domestic investors, both individual and institutional, have been pushing India’s stock market to unprecedented levels.

According to Macquarie Capital, retail investors alone own 9% of India’s equity market capitalization, while foreign investors own just under 20%. However, analysts expect foreign investments to rebound in the second half of 2024, once the elections are over.

The Modi government is aggressively trying to capitalize on the massive rethinking taking place among companies in supply chains. International companies want to diversify their operations away from China, where they have faced obstacles during the pandemic and are threatened by growing tension between Beijing and Washington.

Asia’s third-largest economy has launched a production value-linked incentive programme 26 billion dollars To attract companies to set up manufacturing in 14 sectors, ranging from electronics and automobiles to pharmaceuticals and medical devices.

As a result, some of the world’s largest companies, including Apple (Camel) Supplier Foxconn, is significantly expanding its operations in India.

Billionaire Elon Musk said last week on Channel X that “He looks forwardTo meet Modi in India without setting an appointment. Tesla (TSLA) Its boss is expected to announce a major investment in India soon with the automaker It said It is scouring the country for a suitable location for its first Asian factory outside China.

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Until two years ago, Apple usually only started assembling models in the country Seven to eight months After launch. That has changed in September 2022when Apple started manufacturing the new iPhone 14 devices in India weeks after they went on sale.

Analysts described the change in strategy as a big win for Modi, as growing manufacturing ties with an American giant like Apple will in turn attract other global players in the electronics manufacturing ecosystem to India.

According to market research firm Canalys, up to 23% of iPhones will be manufactured in India by the end of 2025, up from 6% in 2022.

Yet India’s economy, like its democracy, is far from perfect. If re-elected, Modi must face the enormous challenge of creating hundreds of millions of jobs for a population that remains largely poor.

With the Average age is 29 yearsIndia has one of the world’s youngest populations, but the country is not yet able to reap the potential economic benefits from its large young population.

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According to a report released last month by International Labor Organizationeducated Indians between the ages of 15 and 29 are more likely to be unemployed than those with no education, which reflects “Incompatibility with their aspirations and available jobs.”

She added that youth unemployment rates in India are now higher than global levels.

The unemployment rate among young Indians with a college degree is more than 29%, nearly nine times that of those who cannot read or write, the report said.

He added, “The Indian economy has not been able to create sufficient remunerative jobs in the non-agricultural sectors for newly educated youth entering the labor market, which is reflected in the high and increasing unemployment rate.”