India on the Path to Becoming the Third Largest Economy
By: Dr. Jayantilal Bhandari
On May 24, Niti Aayog announced that India has surpassed Japan to become the world’s fourth-largest economy. Billionaire investor Mark Mobius hailed this as an incredible achievement. He attributed it to India’s 1.4 billion population, a growing middle class, increased purchasing power, Prime Minister Modi’s leadership, and strong economic policies.
Challenges Ahead
To become the third-largest economy, India must tackle issues such as global trade tensions, rising tariffs, disrupted supply chains, and a growing trade deficit—particularly with China. In FY 2024–25, India’s exports to China dropped by 14.5% while imports rose by 11.5%, creating a $99.2 billion trade deficit. Prime Minister Modi has urged citizens to support local products, which is crucial for sustainable growth.
MSMEs: A Key Driver
India’s MSME sector will be pivotal in boosting exports and controlling imports. These industries are poised for global competitiveness amidst changing trade dynamics. Government support and entrepreneur readiness are essential for MSMEs to thrive in the global supply chain.
Trade Agreements and Strategic Policy
India must rapidly conclude Free Trade Agreements (FTAs) with the U.S., EU, and countries like Oman, Canada, Israel, and South Africa. A preliminary Indo-US Bilateral Trade Agreement (BTA) is expected to launch on July 8. These deals will cement India’s global economic presence.
Rise of Service Exports & GCCs
India is emerging as the world’s service export capital. In FY 2024–25, service exports reached $387.5 billion. The growth of Global Capability Centers (GCCs)—with over 1,700 in India employing 2 million people—fuels this rise. The sector is projected to contribute 3.5% to GDP by 2030.
Strategic Reforms for the Future
To sustain this trajectory, India must focus on:
- Research & Development (R&D)
- Agricultural and labor reforms
- Ease of doing business
- Investment-friendly policies
- GST simplification and infrastructure upgrades
- Promotion of the 'Vocal for Local' initiative
With these strategic efforts and global collaborations, India is expected to become the third-largest economy by 2028.