The writer is a professor of international relations at King’s College, London.

India’s rise as a critical node in global polity and economy is a reality few would dispute. It reflects the country’s diplomatic outreach, aspirations for global leadership through forums such as the G20 and Brics, and growing geopolitical significance. The latter has increased due to its strategic location and, as the world’s largest democracy, its willingness and ability to play a crucial role in regional security and stability. 

But underlying all this energetic global engagement is the undeniable reality that India’s rapid economic growth over the past few decades is a major driver of its rise as a global player. Liberalising reforms initiated in the early 1990s increased foreign investment, and helped the economy transition from being predominantly agrarian to one of the world’s largest and fastest-growing. The World Bank has projected that the Indian economy will grow this year by 7.5%.

Election promises

Prime minister Narendra Modi’s decade-long tenure has pushed significant economic reforms and initiatives aimed at promoting growth, investment and development. As the country enters another election cycle, Mr Modi is promising that, if elected, he would ensure that India — today the world’s fifth-largest economy — emerges as the third-largest economy over the next five years. 

Since coming to power in 2014, the Modi government has pursued many programmes to improve the business environment and economy more broadly. Implementation of the goods and services tax in 2017 was a major reform aimed at creating a unified indirect tax regime. Despite initial challenges, it has simplified the national tax structure and improved tax compliance.

The 2016 passage of the Insolvency and Bankruptcy Code has facilitated ease of doing business. Meanwhile the government has focused on infrastructure through programmes like Bharatmala project, which aims to construct 84,000 kilometres of highways, and the Sagar Mala project which improves ports to enhance connectivity and facilitate trade. The Digital India campaign led to the Aadhaar biometric identification system, and helped increase digital payments and broadband connectivity.

But despite this policy record, several challenges continue to shape India’s economy. The ‘Make in India’ initiative was launched to promote and attract foreign investment in key manufacturing sectors, with the goal of transforming India into a global manufacturing hub. While it has led to some investment inflows, its impact on manufacturing growth has been mixed. High levels of youth unemployment poses a significant political challenge for the Modi government heading into this election. The country also continues to grapple with income inequality, with disparities between urban and rural areas, as well as among different socio-economic groups. The agricultural sector, which remains the country’s biggest employer, is marked by low productivity, a lack of modernisation and vulnerability to climate change. Supporting farmers and enhancing agricultural productivity are essential for rural development and food security.

More on India:

• India gets $100bn FDI boost with European FTA
• India to become a hub for green ammonia
• IPA Roundtale | How to win diaspora dollars

Patchy record

Critics also point out that despite Mr Modi’s promises to the contrary when he first took office, the pace of privatisation has been very slow. The government continues to insist that it is committed to ensuring that the public sector is present only in core, strategic areas. It has also suggested that despite its Make in India initiative, the focus on self-reliance is aimed only at sectors where cheap imports don’t provide a lasting solution. 

The Modi government has identified four key areas as its priorities for the next five years if it wins the 2024 election: infrastructure, investment, innovation and inclusiveness. How much of this policy agenda Mr Modi could achieve depends on how big a victory he is able to garner at the hustings. 

As India navigates the complexities of a rapidly changing world, its trajectory as a rising power will continue to shape the dynamics of international relations in the 21st century. But to maintain its present trajectory, India’s next government will have to get its economic policy right.

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.