Will India overtake China to become world's economic heavyweight by 2028?

With China's economy slowing and the West seeing it more as a rival than an economic partner currently, is it India's chance to take Beijing's place as the world’s next growth driver?

According to a Bloomberg report, the Indian stock market is booming thanks to foreign funding and the Centre's new trade deals.

The youthful market of 143 crore Indians is attracting international manufacturing bigwigs, who once clustered around southern China.

Aircraft makers such as Boeing are taking record orders from Indian airlines such as Air India and IndiGo, while the tech giant, Apple Inc, is scaling up production of India-made iPhones.

Although the picture looks rosy, India’s $3.5 trillion economy remains dwarfed by the $17.8 trillion Chinese economy. Economists are of the view that it would take a lifetime for India to catch up with its shoddy roads, patchy education, red tape and a lack of skilled workers.

What will India have to do to overtake China?

According to the Bloomberg report, there’s one important measure where India could overtake its northern neighbour far more quickly: as the engine of global economic growth.

Bullish investment banks, such as Barclays, believe that India can become the world’s largest contributor to growth within Prime Minister Narendra Modi’s next term.

The Bharatiya Janata Party is widely expected to win the 2024 Lok Sabha elections set to begin in weeks.

The analysis by Bloomberg Economics is even more optimistic, finding that India can reach that milestone by 2028 on a purchasing power parity basis.

To get there, the Modi government will need to hit ambitious goals in four crucial development areas — building better infrastructure, expanding the skills and participation of the workforce, building better cities to house all those workers, and luring more factories to provide them jobs.

According to a Bloomberg Economics analysis, India could become the World's No. 1 contributor to GDP growth as early as 2028.

China's economic growth averaged 10 per cent a year for three decades following the late 1970s reforms that opened its economy to the world. This is what has made China a magnet for foreign capital and given it greater clout on the world stage.

But the so-called ‘miracle’ phase of China’s expansion is now a thing of the past. The property crisis intersects with the growing Western concerns over China's dominance of supply chains and advances in sensitive technologies.

That, according to the Bloomberg report, is where India comes in. The Modi government is seeking to make the Indian economy more competitive, a shift that’s appealing to Western businesses looking to diversify away from China in search of a deep well of cheap labour.

PM Modi has made India’s accelerating economy a major part of his election pitch, pledging at a rally last year to lift the country’s economy “to the top position in the world” should he win a third term.

Indian government's allocation to infrastructure has more than tripled from five years ago to above ₹11 lakh crore ( ₹11 trillion) for the fiscal year 2024-2025, a figure that could exceed ₹20 lakh crore ( ₹20 trillion) if states’ spending is thrown in.

Modi is projected to invest ₹143 lakh crore ( ₹143 trillion) to improve rail, roads, ports, waterways and other crucial infrastructure in the six years through 2030.

At the same time, the Modi government has sought to tamp down inflation by banning exports of wheat and rice. 

Earlier this decade, the Indian government rolled out incentive programmes of some ₹2.7 lakh crore ( ₹2.7 trillion) to encourage domestic manufacturing, with companies getting tax breaks, lower land rates, and capital to set up factories in India from states as well.

In Bloomberg Economics’ base case scenario, India’s economy will accelerate to 9 per cent by the end of the decade, while China will slow to 3.5 per cent. 

That puts India on course to overtake China as the world’s biggest growth driver by 2028. Even in the most pessimistic scenario — in line with the International Monetary Fund's (IMF) projections for the next five years in which growth stays below 6.5 per cent — India overtakes China’s contribution in 2037.

India stands out as the sole country with a population large enough to offset retiring factory workers in advanced economies and China. 

Bloomberg Economics estimates that some 48.6 million medium-skilled workers — typically employed on the factory floor — will retire from China and advanced economies from 2020 to 2040. In the same period, India will add 38.7 million such workers.