India is posting some of the most robust economic growth rates right now in the world. And with China slowing, India could become the new engine of global economic growth.
But it will take strategic investments, increased labor participation and more for India to achieve its economic ambitions. Bloomberg’s New Delhi-based economics and politics reporter Dan Strumpf joins host Sarah Holder to discuss India’s roadmap, and what its success could mean for the rest of the world.
Here is a lightly edited transcript of the conversation:
Sarah Holder: At the edge of New Delhi, in the city of Noida, the groundwork for India’s economic future is being built.
Vast blocks of electronics factories have sprung up there – from a million-square-foot Dixon Technologies plant staffed by about 26,000 workers; to a Samsung facility that’s churning out 120 million phones a year.
Holder: This new manufacturing hub is at the heart of a push led by India’s Prime Minister Narendra Modi to turn the country into a manufacturing powerhouse, and an engine of global economic growth. Here is Modi talking to Congress in Washington last summer:
Narendra Modi: Today India is the 5th largest economy (CHEERING MODI MODI). And, India will be the 3rd largest economy soon. We are not only growing bigger but we are also growing faster.
Holder: And already, there are some signs that the plan is working: foreign investment is pouring in, the country’s stock market is booming, and manufacturers are ramping up production.
Dan Strumpf: India is posting some of the most robust economic growth rates right now in the world. It’s far and away the world’s fastest growing, Major economy on the world stage.
Holder: That’s Dan Strumpf, who covers economics and politics from New Delhi for Bloomberg. And he says there’s another big reason analysts and economists are paying attention to India right now:
Strumpf: Why is everybody so interested in India? Well, I mean, Of course, one of the biggest reasons is simply that it’s not China.
Holder: That’s because while India’s economy is speeding up, China’s has been slowing down and with China’s strained global trade relations, it looks like India has a unique opportunity to overtake it as the world’s largest contributor to growth.
But to achieve Prime Minister Modi’s most ambitious goals, India still has a lot of work to do: from modernizing its infrastructure to growing its workforce, to building out its urban centers.
Santanu Sengupta: India needs a lot more cities.
Holder: This is Goldman Sachs’s India economist Santanu Sengupta, speaking to the Bloomberg Originals team.
Sengupta: There is a lot of progress already happening. But there are crucial problems like water, like traffic, like urban housing that needs to be solved.
Holder: Today on the show – Could a thriving India follow in China’s economic footsteps? And what will it take to rival its growth? From Bloomberg News, this is The Big Take. I’m Sarah Holder.
Holder: So, for years, China’s economy grew at the fastest pace in the world. But now it’s slowed down considerably. I asked Dan Strumpf: What is it about the Indian economy today that has people saying it could see growth at the rate China once did?
Strumpf: On paper, there’s actually a lot of similarities. Uh, India is now the world’s largest country by population, just surpassed China, 1.4 billion people. It has economic growth, which is very scarce around the world right now. And there’s a number of other factors working in India’s favor. It has what economists refer to as a sort of a, as a demographic dividend, which is that it has this sort of young growing population that is hungry for work and can be put to work, can be put to productive work.
China, of course, has an aging population and a shrinking population as do many developed economies around the world. So all of these kind of factors are, coming together to, to work in India’s favor.
Holder: Prime Minister Modi has pledged to capitalize on this potential. As he seeks a third term in office, he’s promised to take India to “the top position in the world.” And a big part of the plan is to expand India’s manufacturing capacity to bring it up to a quarter of the country’s GDP.
But there’s a lot that has to happen first. Starting with – building better infrastructure.
Strumpf: This is really a big and longstanding issue in India.
India still lags on a number of metrics, say, compared to China, if you go to say, the sort of manufacturing corridors of southern China, for example, I mean, you’ll just see world class infrastructure, world class highways. China is, of course, known for its extremely well developed high speed rail network that took many years to build.
And India has long struggled with things like, uh, roads, you know, the quality of its railroads. It has insufficient airports, insufficient ports; And these are the sort of things that you need to attract things like foreign manufacturers. So, infrastructure has been a major priority for the Modi administration.
Holder: Modi’s administration has promised to commit 143 trillion rupees – the equivalent of well over a trillion dollars – to infrastructure in the next few years. Some of that money will go towards new airports. India last year had about 148 airports but they plan to boost the number to 220 next year. They’re also working on their railways and roads.
Strumpf: One of the most touted projects, when it comes to high speed rail is a forthcoming railway that is meant to connect Gujarat, which, Modi’s home state with Mumbai, which is the financial capital. And this has yet to come online. But it’s sort of this much touted project. And, you know, the ambition is that it’s one of a number of new projects that will kind of stitch together all of these up and coming Indian, industrial and financial centers.
Another project is a major highway that’s meant to be connecting Mumbai with New Delhi, the capital and that’s actually up and running. Things like that help reduce logistics costs and help reduce the overhead that businesses and investors are paying to do business here. And, that’s really sort of the benefit that, it’s hoped, gets reaped from, from investment projects like that.
Holder: To see the kind of growth it wants, India will also have to drive up its labor force participation – which is currently among the lowest in the world. Only a little over half the country’s working-age population was working or looking for a job as of 2022. Rates are even lower for women.
Strumpf: This is a huge problem because, you need more people to be in the workforce if you, if you want to generate growth but it’s also a huge social problem. India suffers from high unemployment, so right now, a very large share of its economy is agricultural. And many economists point to the fact that, India’s workforce is undereducated, there are jobs in the service sector, there are jobs in high tech industries in places like Bangalore, Hyderabad and then there’s jobs for people in the agricultural sector, which is low skilled labor there’s, there’s really a need to increase the share of workers kind of in that, in that middle area, right? Who can do things like, work in factories in large numbers or manage factories.
Holder: It seems like one of the broader goals for growing India’s economy is to grow the country’s middle class the same way China has been able to. How could that reshape the Indian economy?
Strumpf: So, yeah, I mean, this is absolutely the case — the development of India’s middle class is really linked inextricably with building out the manufacturing industry. And the reason for that, that many economists point to, is that manufacturing is one of the few sectors in an economy that really is, is able to generate large numbers of jobs and large numbers of jobs for people who have a little bit of education, but might not be working in technology companies and these are the people that Modi and that India kind of need to put to work, in order to develop and boost the economic growth rate to a level that kind of puts it on track to overtake China.
Holder: If they do manage to get more people into the labor force, and amp up their manufacturing sector, they’ll need to build out their cities. Just 36 percent of India’s population live in cities versus over 64 percent of China’s. I asked Dan how India is thinking about urbanizing.
Strumpf: I think this goes actually right to the infrastructure point, it’s not just about serving business. It’s about serving cities and it’s about building, not just like highways and high speed rail, but metro lines and improved inner city highway links and things like this that that are going to attract housing development, for example, that are going to attract people, uh, I mean, out in, you know, Noida, just by way of example you know, we saw a huge new plot of land where you’ve got just a what’s meant to be a million square foot smartphone factory that’s that’s just broken ground, right? Now, just, you know, about a kilometer away or so in the distance. You’ve got about half a dozen high rises that have just come up that are just under construction that are meant to, um, you know, house a lot of these people to work in this plant. So, you know, one sort of begets the other.
Holder: But India’s still got a lot of catching up to do. Its $3.5 trillion economy today is only about a fifth of the size of China’s.
When we come back: What India’s economic ambitions mean for China and for the rest of the world.
Holder: We’ve been speaking with Bloomberg reporter Dan Strumpf in New Delhi about India’s potential to take the mantle from China as the global leader in economic growth.
Holder: How much does India’s success rely on eating China’s lunch? Does India have to actually take jobs, factories, opportunities away from China?
Strumpf: So there’s two ways of looking at that. You could make the case that India doesn’t need China to slow down to advance. it’s economic growth is not zero sum, and China and India actually have very robust economic ties. And so a slowing in China isn’t on all fronts, necessarily good for India. I think what certainly what Modi recognizes and what many foreign investors are kind of keying in on is that there is this growing desire around the world to kind of de-risk away from China. we hear a lot of talk of this, what’s called this China-plus one strategy where if you’re a big manufacturer or, multinational like Apple or Samsung or something that’s had a big footprint in China for a long time, you don’t necessarily want to do that pull out of China because you’ve got, say in the case of Apple, I think really deep roots there and a massive supply chain that, that can’t really be replicated overnight anywhere else. Um, but you know, you’re mindful of both the slowdown happening in China and of the shifting geopolitical winds.
And you want an alternative that will take a little bit of the heat. Off of that relationship. And that is where India comes in for many of these companies. And many companies are trying to find a way as well to capitalize on this opportunity.
Holder: And is it working so far? Is there a lot more foreign investment flooding into India since it’s, you know, uh, raised the bar on, on these economic expectations?
Strumpf: So I think the answer that you would hear is that it’s working. it’s not a clean one for one dollar for dollar, everybody’s pulling out of China and they’re coming into India. It’s a lot of that investment that say might have been going into into China. If, you know, the world were in a different place right now, it’s getting spread out around the world.
Some of it’s going to India, but a lot of it’s going to Southeast Asia. Vietnam, for example, is actually taking a lot of investment in manufacturing from companies that might’ve been investing in China. Of course, Mexico has also been a major recipient of a lot of this investment as well.
India is getting some of it but, in many ways, what you hear is that India remains a difficult place to do business. There’s a lot of barriers to entry. There are complicated tax regimes to contend with and the sort-of wheels of government in India, you know, they just grind more slowly, certainly than they do in China, where, for better or for worse, one party rule has managed to streamline the economy in a very rapid and swift way.
Holder: What will it mean for the US if India is able to deliver on these ambitious economic growth plans?
Strumpf: So what the US sees in India, I think, is, um, in the best case scenario as a partner, as a country you can work with and as a country you can deal with and, you know, as a fellow democracy, um, as a country with some shared values.
Um, so a more economically vibrant India is a counterweight to China, which is increasingly, the US’s biggest global rival. So from a strategic point of view, India definitely represents a partner with the US and it can also represent, you know, a place where a lot of US companies can invest in and you’re seeing a lot of that investment already coming in.
Holder: We’ve been talking a lot about India’s potential, but I wanted to ask Dan, doesn’t this kind of rapid economic expansion have downsides, too?
Strumpf: You know, just to take the China case, I think it’s, it’s very well documented that the biggest downsides to its economic expansion were the, uh, environmental, uh, side effects that came with it. I mean, you know, um, and, uh, I mean, the stories of pollution in places like Beijing and Shanghai.
Um, I mean, you’re actually seeing that replicated in many Indian cities now in places like New Delhi, where, um, you know, the pollution is literally the worst in the world. So that’s, I mean, that’s the most obvious downside to growth. And especially to rapid growth of that scale.
Holder: So Dan, you’ve really helped us understand the scale of India’s ambitions, where they’re at right now, where they go from here. You’ve also talked to a lot of analysts and economists who are following what’s happening in India really closely. How realistic do they think these growth plans are?
Strumpf: So our colleagues at Bloomberg Economics, they crunched the numbers and they are, um, their conclusion is that India actually can overtake China as the world’s engine of economic growth, meaning it will, it can be the world’s largest contributor to global growth within this decade. That’s sort of in the best case scenario now in a sort of a slower growth scenario, you would see that happening in the next decade.
So I think that there is a strong belief that India can become, can take this sort of mantle as the world’s incremental driver of global growth as China slows down. And you know what that means for India is that it will continue to draw more foreign investment.
It will continue to attract more investment from foreign companies and it will continue to kind of grow. As a player on the world stage.
Holder: Well, Dan, thank you so much for joining us today and sharing your great reporting.
Strumpf: Well, thank you so much.
But it will take strategic investments, increased labor participation and more for India to achieve its economic ambitions. Bloomberg’s New Delhi-based economics and politics reporter Dan Strumpf joins host Sarah Holder to discuss India’s roadmap, and what its success could mean for the rest of the world.
Here is a lightly edited transcript of the conversation:
Sarah Holder: At the edge of New Delhi, in the city of Noida, the groundwork for India’s economic future is being built.
Vast blocks of electronics factories have sprung up there – from a million-square-foot Dixon Technologies plant staffed by about 26,000 workers; to a Samsung facility that’s churning out 120 million phones a year.
Holder: This new manufacturing hub is at the heart of a push led by India’s Prime Minister Narendra Modi to turn the country into a manufacturing powerhouse, and an engine of global economic growth. Here is Modi talking to Congress in Washington last summer:
Narendra Modi: Today India is the 5th largest economy (CHEERING MODI MODI). And, India will be the 3rd largest economy soon. We are not only growing bigger but we are also growing faster.
Holder: And already, there are some signs that the plan is working: foreign investment is pouring in, the country’s stock market is booming, and manufacturers are ramping up production.
Dan Strumpf: India is posting some of the most robust economic growth rates right now in the world. It’s far and away the world’s fastest growing, Major economy on the world stage.
Holder: That’s Dan Strumpf, who covers economics and politics from New Delhi for Bloomberg. And he says there’s another big reason analysts and economists are paying attention to India right now:
Strumpf: Why is everybody so interested in India? Well, I mean, Of course, one of the biggest reasons is simply that it’s not China.
Holder: That’s because while India’s economy is speeding up, China’s has been slowing down and with China’s strained global trade relations, it looks like India has a unique opportunity to overtake it as the world’s largest contributor to growth.
But to achieve Prime Minister Modi’s most ambitious goals, India still has a lot of work to do: from modernizing its infrastructure to growing its workforce, to building out its urban centers.
Santanu Sengupta: India needs a lot more cities.
Holder: This is Goldman Sachs’s India economist Santanu Sengupta, speaking to the Bloomberg Originals team.
Sengupta: There is a lot of progress already happening. But there are crucial problems like water, like traffic, like urban housing that needs to be solved.
Holder: Today on the show – Could a thriving India follow in China’s economic footsteps? And what will it take to rival its growth? From Bloomberg News, this is The Big Take. I’m Sarah Holder.
Holder: So, for years, China’s economy grew at the fastest pace in the world. But now it’s slowed down considerably. I asked Dan Strumpf: What is it about the Indian economy today that has people saying it could see growth at the rate China once did?
Strumpf: On paper, there’s actually a lot of similarities. Uh, India is now the world’s largest country by population, just surpassed China, 1.4 billion people. It has economic growth, which is very scarce around the world right now. And there’s a number of other factors working in India’s favor. It has what economists refer to as a sort of a, as a demographic dividend, which is that it has this sort of young growing population that is hungry for work and can be put to work, can be put to productive work.
China, of course, has an aging population and a shrinking population as do many developed economies around the world. So all of these kind of factors are, coming together to, to work in India’s favor.
Holder: Prime Minister Modi has pledged to capitalize on this potential. As he seeks a third term in office, he’s promised to take India to “the top position in the world.” And a big part of the plan is to expand India’s manufacturing capacity to bring it up to a quarter of the country’s GDP.
But there’s a lot that has to happen first. Starting with – building better infrastructure.
Strumpf: This is really a big and longstanding issue in India.
India still lags on a number of metrics, say, compared to China, if you go to say, the sort of manufacturing corridors of southern China, for example, I mean, you’ll just see world class infrastructure, world class highways. China is, of course, known for its extremely well developed high speed rail network that took many years to build.
And India has long struggled with things like, uh, roads, you know, the quality of its railroads. It has insufficient airports, insufficient ports; And these are the sort of things that you need to attract things like foreign manufacturers. So, infrastructure has been a major priority for the Modi administration.
Holder: Modi’s administration has promised to commit 143 trillion rupees – the equivalent of well over a trillion dollars – to infrastructure in the next few years. Some of that money will go towards new airports. India last year had about 148 airports but they plan to boost the number to 220 next year. They’re also working on their railways and roads.
Strumpf: One of the most touted projects, when it comes to high speed rail is a forthcoming railway that is meant to connect Gujarat, which, Modi’s home state with Mumbai, which is the financial capital. And this has yet to come online. But it’s sort of this much touted project. And, you know, the ambition is that it’s one of a number of new projects that will kind of stitch together all of these up and coming Indian, industrial and financial centers.
Another project is a major highway that’s meant to be connecting Mumbai with New Delhi, the capital and that’s actually up and running. Things like that help reduce logistics costs and help reduce the overhead that businesses and investors are paying to do business here. And, that’s really sort of the benefit that, it’s hoped, gets reaped from, from investment projects like that.
Holder: To see the kind of growth it wants, India will also have to drive up its labor force participation – which is currently among the lowest in the world. Only a little over half the country’s working-age population was working or looking for a job as of 2022. Rates are even lower for women.
Strumpf: This is a huge problem because, you need more people to be in the workforce if you, if you want to generate growth but it’s also a huge social problem. India suffers from high unemployment, so right now, a very large share of its economy is agricultural. And many economists point to the fact that, India’s workforce is undereducated, there are jobs in the service sector, there are jobs in high tech industries in places like Bangalore, Hyderabad and then there’s jobs for people in the agricultural sector, which is low skilled labor there’s, there’s really a need to increase the share of workers kind of in that, in that middle area, right? Who can do things like, work in factories in large numbers or manage factories.
Holder: It seems like one of the broader goals for growing India’s economy is to grow the country’s middle class the same way China has been able to. How could that reshape the Indian economy?
Strumpf: So, yeah, I mean, this is absolutely the case — the development of India’s middle class is really linked inextricably with building out the manufacturing industry. And the reason for that, that many economists point to, is that manufacturing is one of the few sectors in an economy that really is, is able to generate large numbers of jobs and large numbers of jobs for people who have a little bit of education, but might not be working in technology companies and these are the people that Modi and that India kind of need to put to work, in order to develop and boost the economic growth rate to a level that kind of puts it on track to overtake China.
Holder: If they do manage to get more people into the labor force, and amp up their manufacturing sector, they’ll need to build out their cities. Just 36 percent of India’s population live in cities versus over 64 percent of China’s. I asked Dan how India is thinking about urbanizing.
Strumpf: I think this goes actually right to the infrastructure point, it’s not just about serving business. It’s about serving cities and it’s about building, not just like highways and high speed rail, but metro lines and improved inner city highway links and things like this that that are going to attract housing development, for example, that are going to attract people, uh, I mean, out in, you know, Noida, just by way of example you know, we saw a huge new plot of land where you’ve got just a what’s meant to be a million square foot smartphone factory that’s that’s just broken ground, right? Now, just, you know, about a kilometer away or so in the distance. You’ve got about half a dozen high rises that have just come up that are just under construction that are meant to, um, you know, house a lot of these people to work in this plant. So, you know, one sort of begets the other.
Holder: But India’s still got a lot of catching up to do. Its $3.5 trillion economy today is only about a fifth of the size of China’s.
When we come back: What India’s economic ambitions mean for China and for the rest of the world.
Holder: We’ve been speaking with Bloomberg reporter Dan Strumpf in New Delhi about India’s potential to take the mantle from China as the global leader in economic growth.
Holder: How much does India’s success rely on eating China’s lunch? Does India have to actually take jobs, factories, opportunities away from China?
Strumpf: So there’s two ways of looking at that. You could make the case that India doesn’t need China to slow down to advance. it’s economic growth is not zero sum, and China and India actually have very robust economic ties. And so a slowing in China isn’t on all fronts, necessarily good for India. I think what certainly what Modi recognizes and what many foreign investors are kind of keying in on is that there is this growing desire around the world to kind of de-risk away from China. we hear a lot of talk of this, what’s called this China-plus one strategy where if you’re a big manufacturer or, multinational like Apple or Samsung or something that’s had a big footprint in China for a long time, you don’t necessarily want to do that pull out of China because you’ve got, say in the case of Apple, I think really deep roots there and a massive supply chain that, that can’t really be replicated overnight anywhere else. Um, but you know, you’re mindful of both the slowdown happening in China and of the shifting geopolitical winds.
And you want an alternative that will take a little bit of the heat. Off of that relationship. And that is where India comes in for many of these companies. And many companies are trying to find a way as well to capitalize on this opportunity.
Holder: And is it working so far? Is there a lot more foreign investment flooding into India since it’s, you know, uh, raised the bar on, on these economic expectations?
Strumpf: So I think the answer that you would hear is that it’s working. it’s not a clean one for one dollar for dollar, everybody’s pulling out of China and they’re coming into India. It’s a lot of that investment that say might have been going into into China. If, you know, the world were in a different place right now, it’s getting spread out around the world.
Some of it’s going to India, but a lot of it’s going to Southeast Asia. Vietnam, for example, is actually taking a lot of investment in manufacturing from companies that might’ve been investing in China. Of course, Mexico has also been a major recipient of a lot of this investment as well.
India is getting some of it but, in many ways, what you hear is that India remains a difficult place to do business. There’s a lot of barriers to entry. There are complicated tax regimes to contend with and the sort-of wheels of government in India, you know, they just grind more slowly, certainly than they do in China, where, for better or for worse, one party rule has managed to streamline the economy in a very rapid and swift way.
Holder: What will it mean for the US if India is able to deliver on these ambitious economic growth plans?
Strumpf: So what the US sees in India, I think, is, um, in the best case scenario as a partner, as a country you can work with and as a country you can deal with and, you know, as a fellow democracy, um, as a country with some shared values.
Um, so a more economically vibrant India is a counterweight to China, which is increasingly, the US’s biggest global rival. So from a strategic point of view, India definitely represents a partner with the US and it can also represent, you know, a place where a lot of US companies can invest in and you’re seeing a lot of that investment already coming in.
Holder: We’ve been talking a lot about India’s potential, but I wanted to ask Dan, doesn’t this kind of rapid economic expansion have downsides, too?
Strumpf: You know, just to take the China case, I think it’s, it’s very well documented that the biggest downsides to its economic expansion were the, uh, environmental, uh, side effects that came with it. I mean, you know, um, and, uh, I mean, the stories of pollution in places like Beijing and Shanghai.
Um, I mean, you’re actually seeing that replicated in many Indian cities now in places like New Delhi, where, um, you know, the pollution is literally the worst in the world. So that’s, I mean, that’s the most obvious downside to growth. And especially to rapid growth of that scale.
Holder: So Dan, you’ve really helped us understand the scale of India’s ambitions, where they’re at right now, where they go from here. You’ve also talked to a lot of analysts and economists who are following what’s happening in India really closely. How realistic do they think these growth plans are?
Strumpf: So our colleagues at Bloomberg Economics, they crunched the numbers and they are, um, their conclusion is that India actually can overtake China as the world’s engine of economic growth, meaning it will, it can be the world’s largest contributor to global growth within this decade. That’s sort of in the best case scenario now in a sort of a slower growth scenario, you would see that happening in the next decade.
So I think that there is a strong belief that India can become, can take this sort of mantle as the world’s incremental driver of global growth as China slows down. And you know what that means for India is that it will continue to draw more foreign investment.
It will continue to attract more investment from foreign companies and it will continue to kind of grow. As a player on the world stage.
Holder: Well, Dan, thank you so much for joining us today and sharing your great reporting.
Strumpf: Well, thank you so much.
