India Seizes Opportunity to Redefine Global Economic Landscape

In a recent discussion on the changing dynamics of the global economy, NK Singh, President of the Institute of Economic Growth and Chairman of the Fifteenth Finance Commission, highlighted India’s potential to reshape its role in the new global order. He emphasized that technology is fundamentally altering power structures, leading to a move from universal regulations to more localized strategic alliances. This transition marks a significant departure from the post-Cold War era, which was characterized by a general acceptance of liberal democracy and market capitalism.

As the world’s geopolitical landscape becomes increasingly complex, Singh outlined ten key trends that encapsulate this shift. The first trend indicates that global economic growth has stagnated at approximately 3%. While advanced economies are projected to grow at rates between 1.4% and 1.6%, emerging markets, including India, are expected to see growth near 4.2%. Notably, India’s real GDP surged by 8.2% in the second quarter of the fiscal year 2026, positioning it as a significant outlier among global economies.

Singh expressed optimism about India’s aspiration for Viksit Bharat (Developed India) by 2047. Recent government reforms, including the introduction of new labour codes, are expected to enhance productivity and economic growth. With a history of having achieved a nominal dollar growth of 10.1%, Singh believes that India’s path to its developmental goals is within reach.

The second trend highlights the re-emergence of deep fiscal challenges for many nations. Public debt in advanced economies has soared to over 110% of GDP, with the United States nearing 107%. These nations face mounting pressures from aging populations, defense spending, and climate adaptation costs, leading to a constrained fiscal environment.

Trade, a driving force of globalization, is also undergoing transformation. Singh noted that merchandise trade growth is anticipated to decline from 2.4% in 2025 to below 1% in 2026. The World Trade Organization’s dispute resolution mechanism has stalled, prompting countries to pursue regional trade agreements such as the USMCA, RCEP, and the India-UAE CEPA. This shift highlights the growing influence of security considerations in shaping trade routes.

Moreover, Singh pointed out that industrial policy is regaining prominence. The United States has allocated over $390 billion through initiatives like the Inflation Reduction Act, while Europe is expanding state-aid regulations and testing carbon-border adjustments. In contrast, China is grappling with excess production capacity and declining domestic demand, leading to significant financial losses for its solar companies.

Taiwan has emerged as a focal point in this global economic landscape, supplying over 60% of the world’s semiconductors. A potential disruption in the Taiwan Strait could severely impact global supply chains, a risk that the world cannot afford to overlook.

With these global changes, Singh asserts that India is uniquely positioned to capitalize on emerging opportunities. The country is experiencing favorable economic indicators, including a gross non-performing asset ratio of approximately 2.6% and foreign direct investment reaching $70.9 billion in fiscal year 2024, with projections of rising to between $80 billion and $90 billion in the current year.

Nevertheless, Singh identified several constraints that India must address to transform its economic landscape. The corporate bond market remains stagnant at 18% of GDP, and manufacturing constitutes just 17% of the economy. Female labor participation, currently at 41.7%, must improve to achieve the scale necessary for sustainable growth.

To navigate these challenges, Singh outlined five trends that will shape India’s future. The first is the urgent need for supply-chain realignment, particularly as Apple shifts production to India. With about 14% to 15% of its iPhones now being manufactured in the country, this figure is expected to rise to 25% by 2027.

Additionally, India is tasked with exporting value rather than merely volume. The electronics and pharmaceuticals sectors must double their current export levels, while new areas such as defense manufacturing, specialty chemicals, and advanced digital services should be prioritized.

The development of domestic capital markets is crucial for financing infrastructure and energy transition initiatives, which are projected to cost trillions. Mobilizing long-term capital from pension funds and insurance pools is essential for sustaining economic growth.

Frontier technology must also become a national priority, with investments in sectors like AI, advanced manufacturing, and critical minerals. Currently, India’s research and development investment stands at just 0.7% of GDP, which should increase to 2% to keep pace with global advancements.

Finally, unlocking India’s demographic dividend through improved job creation and labor participation rates is paramount. The Ministry of Labour and Employment aims to increase the Female Labour Force Participation Rate to 55% by 2030, aligning more closely with the East Asian average of over 60%.

In conclusion, NK Singh asserts that India stands at a crossroads where it can redefine its economic trajectory. By acting decisively and with a clear vision, the nation can navigate the complexities of the global landscape and emerge as a significant player in shaping the future. As he aptly noted, this is not the end of history but rather the beginning of a new chapter, with India poised to play a pivotal role.