Morning activity at the flower market in Bangalore

Morning activity at the flower market in Bangalore

Foto: Mahesh Shantaram / DER SPIEGEL

A New Superpower? India's Economic Rise Holds Promise for the Country and Beyond

India is now the world's most populace country and will likely soon become the third largest economy on the globe. For decades, economists have been predicting that India's time would come. Has it finally arrived?
By Laura Höflinger in Bangalore, India

It wouldn’t be the first time that the world order shifted with billionaire Nandan Nilekani playing playing a part in it.

With his company, he experienced firsthand what a meteoric rise feels like. And if it were up to him, the miracle would happen again – but this time for his entire country. "I haven’t seen that kind of excitement for a long time."

Foto: Urban Zintel / DER SPIEGEL

The article you are reading originally appeared in German in issue 16/2023 (April 15th, 2023) of DER SPIEGEL.

SPIEGEL International

Nilekani, 67, is sitting in the meeting room of his foundation in Bangalore. Inside, it is cool and quiet, while the streets outside are buzzing with mopeds and cars competing for road space. Within just 20 years, the population of this southern Indian metropolis has doubled to an estimated 13 million people. Almost every large tech company in the world has an office here, with shining buildings among the palm trees. Bangalore is the epitome of outsourcing and globalization. Hundreds of thousands of jobs at IT companies and call centers that left the United States and Europe in the 1990s have ended up in this city.

It was a process that made people like Nilekani wealthy. More than 40 years ago, he and a handful of colleagues founded Infosys, with an initial investment of $250. Today, the IT giant employs more than 340,000 people and generates annual revenues of $18 billion. One of the company’s founders is British Prime Minister Rishi Sunak’s father-in-law.

New Delhi is watching the world’s shifting balance of power with no small amount of satisfaction. With Russia having launched a war of aggression in Ukraine and China flexing its muscles in the East, heads of state and senior company executives from across the globe are wooing India.

It is a change that has suddenly raised a number of important questions. Can India become the kind of driver of the global economy that China has been for years? Can it provide a real democratic alternative? Can this country, which is still home to extensive poverty, become wealthy? Might it become a superpower one day?

There are certainly a number of indications that the future is bright. Even as the global economy is stumbling, India has remained stable. The International Monetary Fund (IMF) is projecting that India will contribute 15 percent of global growth in 2023.

On top of that, India replaced China on April 14 as the world’s most populace nation. The precise date is the product of forecasts produced by the United Nations, according to which the population of India on that day was 1,425,775,850. That is more than three times the number of people who live in the European Union and more than the total in North and South America combined. Close to every fifth person on the planet lives in India.

And India’s population is young, younger than China’s. Salaries are relatively low, and the nation’s potential is enormous.

Many currently believe that India’s moment has finally arrived, and the country is gripped by optimism. "There’s now no question that one of the fastest growing economies in the world over the next 10 years will be India," Singapore-based political scientist Kishore Mahbubani recently said during an interview with Fareed Zakaria on CNN. Referring to Indian Prime Minister Narendra Modi, he added: "I don’t know how Modi did it, but he’s woken up a sleeping giant."

The investment bankers from Morgan Stanley even announced recently that "India’s decade" is just starting. It is a view that billionaire Nilekani holds as well: "All of the puzzle pieces are falling into place."

Still, in Bangalore, where Nilekani made his fortune, it is relatively easy to be an optimist. India’s IT capital is also home to poverty, corruption and traffic chaos. But the city provides a look at India's potential: Birthrates are on a par with those in Western Europe, while young men and women spend their Saturday evenings in cafés serving wheat beer and espresso out of machines that sound just as they do in Berlin.

You can meet mothers and fathers in the city who can barely read or write, but whose daughters study engineering, computer science or mathematics. They tend to avoid majors like literature or philosophy, instead sticking to courses of study that the parents know will lead to success.

A brewery in Bangalore

A brewery in Bangalore

Foto: Mahesh Shantaram / DER SPIEGEL

In other parts of the country, things don’t always look quite as rosy. There are countless villages, home to millions, where people still cook with solid fuels and where the paths turn into a muddy morass during the rainy season. Almost all children attend school, to be sure, but the quality of the state facilities is often poor.

Nilekani leans back and smiles. He is familiar with all of the objections frequently raised by skeptical foreigners. Indeed, these days he devotes a significant share of his fortune to ensuring that boys and girls receive adequate education.

This year, the Indian economy is expected to continue on its growth path, with forecasts calling for an uptick of 6 percent. Among the world’s largest economies, only Saudi Arabia is forecast to experience stronger growth. And when India hosts this year’s G-20 summit in September, the eyes of the world will once again be trained on the country.

Many are already knocking at Nilekani’s door to gain insight into the country. Indeed, he hasn’t just been a close observer of India’s transformation, he has also played a significant role in actively shaping it. On behalf of the government, he implemented the vast undertaking known as Aadhaar, meaning "foundation." A revolutionary project – if a bit concerning to those worried about data privacy – it essentially involved issuing an identity card to everybody in the country. By now, almost every Indian has one of the flimsy plastic cards, which also store their fingerprints and biometric data.

For millions of people, it was the first time they were able to adequately identify themselves. Prior to receiving Aadhaar cards, many were unable to open bank accounts, but now, a majority of the country’s adult population has one, meaning that benefit payments can now be wired directly to the recipient. The state is able to reduce bureaucracy – and with greedy middlemen out of the way, more money ends up in the hands of recipients.

Nilekani’s next act was to help with constructing a payment system that he refers to as the "rails of the modern, digital world." The system allows Indians to instantly wire money from one mobile device to another, without having to pay a fee.

Nilekani believes technology is the key to solving the biggest problems facing humanity. "Each time, I ask myself the question: How can we use technology for our country's progress and advancement? How can we build to scale and improve people's lives?"

It's an approach similar to the one taken by Prime Minister Modi, who also sees digitalization as a means of achieving one of his most important goals: the elimination of poverty. And the government has made significant progress toward that target: More than 400 million Indians have escaped poverty in the last 20 years.

Electronic payment signs at market stands

Electronic payment signs at market stands

Foto: Mahesh Shantaram / DER SPIEGEL

Modi likes to act as though he alone is responsible for that trend. And as it happens, he embodies the hope that anyone can make it. The 72-year-old is from a lower caste and his father used to serve tea on the train platform of a small-town station in the west of the country. Now, his son has accumulated more power than almost any other prime minister before him. During the election campaign, he bragged about the size of his chest (142 centimeters), but he is also the first premier to have been born after India’s independence. When traveling overseas, he prefers speaking Hindi to English, transmitting an encouraging message to his countrymen – that they should be proud of where they are from.

Many in the country venerate him for precisely that reason, with the result that Modi’s party, the Bharatiya Janata Party (BJP) enjoys an absolute majority in parliament. It is considered highly likely that he will once again emerge victorious in next year’s parliamentary election.

Modi has convinced his country that India can only return to past greatness under his leadership – back to a time before the arrival of the British, who sucked the country dry for 200 years. It is the promise that the ignominy of yesteryear will finally fade into the past for good. And India will command that which it so desires: recognition.

The prime minister, though, is convinced that India must remain true to the values of an ancient Hindu civilization. He is a Hindu nationalist and sees India first and foremost as the homeland of the Hindus. Minorities such as Muslims and Christians have a place in his new India, but only if they conform to the rules of the majority.

Modi supporters at the dedication of a new subway line in Bangalore

Modi supporters at the dedication of a new subway line in Bangalore

Foto: Mahesh Shantaram / DER SPIEGEL

Modi is even using his current G-20 presidency to further his narrative of India’s rebirth. Posters bearing his visage are hanging everywhere in the country along with statistics testifying to the country’s success. Not all of the numbers, however, are reflective of reality, and not all of the successes have been the result of his initiatives. He has, however, proven adept at implementing them.

"This government has a bias for action," says Nilekani, expressing a view held by many. Modi may not have pushed the decisive reforms through parliament, but during his nine years at the top, he has dramatically sped things up in the country.

All you have to do is look at the new ports and the new roads, says Nilekani, all the trucks and bulldozers at work around the country. Highways that have been mired in the planning stage for years are finally being built. New high-speed trains are going from city to city. Around 80 new airports are to be built in the coming years.

The government, Nilekani continues, has a better handle on the economy, and the new combination of both physical and digital infrastructure, he believes, will combine to produce enormous growth. Plus, he says: "India’s great strength is China’s weakness." A number of large corporations are focused on diversifying their supply chains, Nilekani points out. Apple now has a presence in India. Others, he believes, will follow. "Everything is coming together. This time, it is for real."

The Narasapura Industrial Area is a two-hour drive east of Bangalore along a two-lane road – which doesn’t prevent Indian drivers from using it as though there were four lanes. Construction is underway here, too, with trucks and bulldozers everywhere.

At some point, the road turns into the industrial area, where Wistron – a large Taiwanese parts supplier for Apple – has a factory. According to forecasts from J.P. Morgan in the U.S., some 25 percent of all Apple smartphones will be produced in India just two years from now. The Taiwanese firm Foxconn has also recently announced the construction of a new mega-factory in the country. "Made in China" is morphing into "Made in India."

India is already home to strong IT and pharmaceuticals industries, but it was never the world’s factory in the same way China has been over the last decades. Foreign companies may have valued India being a democracy, but were nevertheless wary of relocating production facilities to the country due to its poor infrastructure and Kafkaesque bureaucracy.

The Hindu New Year's festival. Prime Minister Modi sees India first and foremost as the homeland of Hindus.

The Hindu New Year's festival. Prime Minister Modi sees India first and foremost as the homeland of Hindus.

Foto: Mahesh Shantaram / DER SPIEGEL

These days, though, India is seen as a reliable partner while China’s image has become tarnished, with many considering Beijing to be unpredictable. During the coronavirus pandemic, the government imposed extremely strict lockdowns, which unsettled many. On top of that, President Xi Jinping has proclaimed himself the country’s eternal leader and has also continued to maintain friendly relations with Russian President Vladimir Putin despite Russia’s hostile invasion of Ukraine. In response, a huge number of companies are suddenly rushing to find alternatives to their factories in China. "I've never received so many senior representatives from German companies as I have in the last six months," says Rajesh Nath, from the Indian branch of the influential German trade association VDMA, which represents the machinery and equipment manufacturing sector. "And I’ve been in this job for 23 years."

The Indian government has established a multibillion-dollar subsidy program to attract companies interested in producing things like semiconductors, batteries and mobile phones in India – a plan that has been praised even by critical economists. Every month, millions of Indians are entering the job market, and they badly need better jobs than those that have thus far been available.

Asha CS, an earbud in her ear and hair tied back in a ponytail, is sitting in a ricksha at the end of the road leading to the factory. The sun is blazing down as a farmer drives his herd of goats past. The 25-year-old looks at the buses leaving the factory premises, full of young men and women on their way home from work. She hopes that she, too, will soon have a spot on one of the buses.

Asha CS would very much like to work for Wistron. The cafeteria inside the factory is clean and the inside areas are all air conditioned, not like at her home, where the monsoon never brings enough rain for the fields and the money always runs out before the end of the month. She hopes that her job interview went well. "I’ve been looking everywhere for work," she says, "and have been unable to find any other job." She has rent to pay and debts to pay off, along with two young children she wants to send to a private school. For her, the black factory gate holds the promise of a better future.

But not everybody is convinced of this bright future. "There is no inevitability, no straight line of causation, from the decline of China to the rise of India," wrote the economists Arvind Subramanian and Josh Felman in a December article for Foreign Affairs. There are, the duo wrote, indications that things are going in the right direction, but they say there are still plenty of "software bugs."

A number of foreign companies are still hesitant about setting up shop in India because the government focuses on what it calls "national champions," a handful of large Indian corporations that seem to win important contracts at a higher rate than other companies. On top of that is India’s tendency, even 30 years after liberalization, to continue protecting its economy, with comparatively high customs duties. The country has been negotiating for years with the EU over a free-trade agreement, thus far with little success.

Almost 76 years have now passed since India wrestled its independence from Britain. Back then, on August 15, 1947, the day when India "awoke to life and freedom," many thought the new republic would have a short life. It was too poor, they said, home to too many religions and ethnicities. It couldn’t even agree on a common language. British statesman Winston Churchill said that India "is no more a united nation than the Equator," and predicted that it would quickly fail.

Today, the Indian economy has left the British in the dust. The country’s steel factories are among the largest in the world, and more than 50 percent of all children in the world will receive at least one vaccine produced in India during their lifetime. India has a vibrant film industry (Bollywood) and has also produced an extremely successful diaspora. Sons of Indian middleclass families are in control at both Google and Microsoft, while a third, Ajay Banga, is set to be confirmed as president of the World Bank in the coming weeks.

Still, the rise might not be quite as rapid as the meteoric explosion undergone by China. Economist and author Niranjan Rajadhyaksha believes it realistic to expect the Indian economy to grow by 6.5 percent annually over the next decade – which is certainly strong, but not equal to the double-digit growth China has repeatedly experienced.

Still, India’s rise is good news for the West. Within several years, the country is likely to become the world’s third largest economy behind the U.S. and China, essentially becoming a third economic anchor in a multipolar world. India would have weight and its actions would have consequences.

A shopping street in Bangalore: India's economy is expected to grow strongly over the next decade.

A shopping street in Bangalore: India's economy is expected to grow strongly over the next decade.

Foto: Mahesh Shantaram / DER SPIEGEL

In recent years, India has grown ever closer to the West, even though it won’t likely ever become a close ally. The country doesn’t necessarily share all of the West’s values, and approaches the world pragmatically – in the search for partners rather than friends. But India also isn’t a country harboring dreams of annexing islands or pushing the U.S. off of its throne. And it shares American and European concerns about Chinese dominance in Asia.

As such, India’s rise could ultimately transform the world in a way that is more amenable to the West’s vision of the future.

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