India’s Economic Ascent: The Slowly Trundling Elephant Gaining Momentum

India’s economic growth could propel it to become the world’s second-largest economy by 2075, positioning it as a viable alternative to China for investors and international businesses.

India, often likened to a “slowly trundling elephant,” is gradually making its way through a myriad of challenges and reforms. Despite facing numerous hurdles, the country is garnering attention as a prospective economic powerhouse. Veteran investor David Roche emphasized that India is now a credible alternative to China, particularly as China’s appeal for foreign direct investment and portfolio flows declines.

Roche, during an interview with CNBC’s “Street Signs Asia,” elaborated on India’s potential and the changing dynamics in the global investment landscape. He observed that India has been aligning itself with the “democratic alliances” of the “richest and most vibrant economies” globally. Roche’s remarks echo the sentiment that India, having recently surpassed China to become the world’s most populous nation, is well-positioned to leapfrog its neighbor and become the world’s second-largest economy by 2075.

A Shift in Investment Flows India’s strategic positioning and economic reforms make it increasingly attractive to investors and businesses. Roche believes that India is on the verge of a shift in investment flows—both in terms of foreign direct investment (FDI) and portfolio investments—out of China and into India.

The changing investment landscape is influenced by India’s engagement with global economic alliances and its burgeoning population, which offers a sizable consumer market. As Roche put it, “So I think we’re looking at a transfer of not only fixed investment by corporations but portfolio investments out of China and into India.”

Caution Amid Optimism While India’s economic outlook appears promising, Roche offered a note of caution. He indicated that sometimes the perception of the amount of investment flowing into India may exceed the actual figures. Despite the optimism surrounding India’s growth story, it’s essential to sound a note of caution and evaluate current investment levels pragmatically.

India’s Growth Momentum Several economists and experts have expressed optimism about India’s economic growth. The International Monetary Fund’s (IMF) October update of its World Economic Outlook projected India’s economy to grow by 6.3% in 2023. Alicia Garcia-Herrero, the chief Asia-Pacific economist at Natixis, highlighted India as “a bright spot in the global economic picture.” She noted that the positive outlook on India had enticed global companies to diversify their manufacturing operations into the country.

Diversification from China Leading global companies, such as Google and Apple supplier Foxconn, have initiated manufacturing activities in India. Google’s decision to manufacture its Pixel 8 phone in India and Foxconn’s production of the iPhone 15 are notable examples. India, being the second-largest smartphone market globally, accounting for nearly 12% of the global market, has attracted significant investments from technology giants.

Roche, however, emphasized that a complete exit from China by companies is unlikely to occur in the near term. The complexities and investments associated with manufacturing in China, coupled with the need for careful strategic decisions, make any transition away from China a gradual process.

India’s economic journey, marked by growth and ongoing reforms, holds great promise. As investors and international businesses explore the opportunities it presents, India’s ascent in the global economic landscape is expected to continue, solidifying its role as a key player in the evolving world economy.