Throughout history, the economic landscape has witnessed shifts in global power, and India’s story is no exception. Renowned economic historian Angus Maddison estimated that India once held the title of the world’s largest economy for an impressive 1,500 years. However, by 1820, China took the lead, and together, they dominated the world economy until the late 19th century, when Western industrialization and colonization reshaped the balance. Britain emerged as the preeminent economic power, followed by the United States by 1900. Now, with Asia’s rise gaining momentum, the question arises: is the world economy returning to its historical norm?
The prospect of such a shift cannot be underestimated. China’s economy, already at 70 percent of the US, is growing at a rate more than twice that of the latter, positioning it to become the world’s largest economy between 2035 and 2040. However, the debate centers on whether India’s economy will also surpass the US and, if so, when.
The encouraging news for India is that, in the 15 years leading up to the COVID-19 pandemic, the country achieved an impressive real GDP growth rate of 8 percent, far outpacing the U.S.’s growth of less than 2 percent. If India can maintain this growth over the next two decades and then sustain a 5 percent annual growth rate thereafter, it could potentially overtake the US economy by 2073.
Several factors are working in India’s favor. Firstly, its GDP per capita is significantly lower than that of China and the U.S., creating vast opportunities for catching up. As India accumulates capital and improves its workforce’s skills, it can achieve substantial productivity gains by adopting existing superior technologies.
Additionally, India benefits from its youthful and large population. A younger population offers advantages such as a relatively larger workforce, higher output per capita, increased savings, higher investment, and more innovation.
The stage is set for India’s resurgence as a global economic powerhouse. By leveraging its young population, capitalizing on economies of scale, and embracing the principles of globalization and reform, India can carve its path to prosperity and reclaim its historical status as one of the world’s leading economies.
