Sustaining the India growth story

Perhaps no phrase better captures the changing views of financial markets and the news media regarding the world's two largest developing economies than the title of a 2023 S&P report: "China slows, India grows".

-  SHANG-JIN WEI

While China is grappling with an economic slowdown, India appears to be thriving. The Indian stock market is booming, with the number of trading accounts registered with its National Stock Exchange skyrocketing from 41 million in 2019 to 140 million in 2023. Moreover, as Western companies exit China, India is emerging as a leading alternative. With an annual growth of 7-8 per cent, it is widely expected to become the world's third-largest economy by the end of this decade.

But could India really overtake China and the United States to become the world's largest economy by the end of this century, as some predict? Or is its economic boom overhyped? On the surface, India holds significant advantages over other major economies. The first is its favourable demographic profile. In April 2023, India officially overtook China as the world's most populous country.

With 43.3 per cent of its population under the age of 25, compared to just 28.5 per cent in China, its workforce is also significantly younger. Moreover, higher US and EU tariffs on Chinese imports, together with rising labour costs and regulatory pressures within China, will sustain multinational corporations' shift away from the Chinese market. India, with its vast population and booming economy, is a natural alternative.