India’s Path to Becoming the World’s Third-Largest Economy: Leveraging the ‘China Plus One’ Strategy
News Mania Desk/Agnibeena Ghosh/22nd July 2024
India, currently the world’s fifth-largest economy by nominal GDP, is aiming to ascend to the third spot in the coming years. One strategic avenue for this ambitious leap is the ‘China Plus One’ strategy. But how feasible is this goal, and what challenges lie ahead for India in its quest to achieve ‘Viksit Bharat’ by 2047?
The Economic Survey for 2023-24, presented by Finance Minister Nirmala Sitharaman, outlines a challenging road ahead for India. Unlike China’s rise from 1980 to 2015, which occurred in a relatively stable geopolitical climate with globalization in full swing, India’s path will be shaped by a markedly different global landscape. The survey notes that while China benefited from a supportive international environment, India faces a more complex and uncertain backdrop.
During China’s rise, the global focus was on integration and economic expansion, with Western powers encouraging China’s entry into the global economy. Today, the situation is starkly different. The current era is characterized by heightened concerns over climate change, geopolitical tensions, and the disruptive potential of technologies such as artificial intelligence (AI). These factors create an environment rife with uncertainties that could hinder India’s growth trajectory.
AI, in particular, poses a significant challenge. Its impact on labor markets across various skill levels could introduce new obstacles to sustained economic growth. To navigate these challenges, the Economic Survey emphasizes the need for a coordinated effort among federal and state governments and the private sector.
India’s ability to capitalize on the ‘China Plus One’ strategy is seen as a key factor in its economic future. This strategy involves diversifying supply chains away from China, and India is well-positioned to benefit from this shift due to its large domestic consumer base. Businesses looking to relocate from China may find India an attractive alternative for establishing operations.
The Economic Survey outlines two primary approaches for India to leverage the ‘China Plus One’ strategy: integrating into China’s supply chain or attracting foreign direct investment (FDI) from China. Among these, prioritizing FDI from China emerges as a more promising route. Historical examples from East Asia suggest that FDI can enhance India’s export potential, particularly to markets like the United States, by fostering deeper economic ties and technological transfer.
On the other hand, relying on trade alone may not be as advantageous. India’s trade deficit with China has been widening, and the inefficiencies of importing from China only to re-export could be detrimental. Instead, inviting Chinese companies to invest directly in India could streamline operations and increase value-added exports to Western markets, making it a more strategic approach.
In summary, while India’s ambition to become the third-largest global economy and achieve ‘Viksit Bharat’ by 2047 is a commendable goal, it requires navigating a more complex and challenging global landscape than China faced. The ‘China Plus One’ strategy offers a potential pathway, especially through FDI, but success will depend on how well India adapts to the evolving geopolitical and technological realities.
