Ever since independence in 1947, India’s leaders imagined that the country would become a great power — it possessed a storied civilization, a large landmass, and population and epitomized a successful experiment in liberal democracy. But becoming a great power required that its large population become much more productive and the country at large approach the global technological frontier.
A post-colonial legacy of territorial disputes with Pakistan and China combined with slow growth during the Cold War stymied India’s great power ambitions. Economic accomplishment proved elusive because of excessive statism that also choked its international trade. After the Cold War, India’s fortunes turned for the better. The 1991 economic reforms began to undo excessive state controls over the economy and restored external linkages, pushing India towards higher growth.
Since his election in 2014, Prime Minister Narendra Modi has embarked on a quest to remake India. He has invested heavily in expanding infrastructure and building a welfare state that brings its poorest people into the formal economy while institutionalizing pro-business policies to encourage higher growth. Problematically, he has also sought to transform India’s previously liberal political regime into a self-conscious Hindu state. Modi’s ambition to speed up India’s global ascendency has benefited from India’s increasing material strength. New Delhi’s renewed international activism is now anchored in a striking realpolitik that is marked by a naked — sometimes even abrasive — emphasis on self-interest.
This approach has benefited from global geopolitical trends, especially U.S.–China security competition, which has pushed Washington to back New Delhi as a counterpoise to Beijing’s prominence in Asia and beyond. The United States is not alone. Between growing disenchantment with China and the promise of India’s large market and future economic growth, most major Western powers have doubled down on engagement with India. So has the Global South, which sees new opportunities for collaboration.
Realizing the ambition of becoming a great power, however, requires more of India.
India will need to transform its immediate neighborhood to preserve a favorable environment for sustaining internal economic growth, deepen domestic economic reforms to accelerate long-term transformation, and preserve its complex social tapestry to enable its citizens to contribute towards its goal.
Securing a peaceful local environment has proven difficult. The biggest challenge has been managing ties with China. The meltdown in bilateral ties, provoked by border clashes in May 2020, is disconcerting. It is also complemented by other problems around India’s periphery — ongoing crises in Pakistan, Myanmar, Sri Lanka, and the Maldives create distractions that India would prefer to avoid yet cannot.
If India can avoid regional wars, its long-term success will depend fundamentally on its internal economic performance. The principal task facing its leaders is to convert what has been an episodic peak growth rate of 7 percent or higher into a new trend growth rate for at least the next two decades.
The gains chalked up since 1991 are owed to the reforms in India’s product markets. But high future growth will depend on a deep liberalization of its factor markets — particularly how it allocates and utilizes land, labor, and capital and provides better opportunities for entrepreneurship.
The challenges here are myriad and difficult because they collide with domestic interests that seek to maintain the existing sclerotic system. They are exacerbated by Modi’s overweening ambition to ensure the nationwide dominance of his Bharatiya Janata Party through the elimination of opposition political parties and social challengers — a goal that impedes the creation of the coalitions necessary to implement difficult reforms.
There are three immediate economic hurdles that India must overcome. The first is agricultural reform. Agriculture employs close to 45 percent of India’s population but contributes only about 15 percent to its GDP. But a crying need to absorb this unproductive fraction into sectors of the economy that can better utilize unskilled labor only highlights the larger problem of India’s low labor productivity.
Stimulating Indian manufacturing is next. Studies suggest that India cannot sustain a 7 percent plus growth rate without substantially increasing manufacturing. Modi’s “Make in India” campaign constitutes a commendable rectification. But concentrating on flashy, highly capital-intensive manufacturing is unlikely to produce the 56 million non-farming jobs that will be required in India by 2030.
The third challenge is international trade. Modi’s misguided shift toward protectionism today reflects all the pathologies that are now so prevalent worldwide. The global post-war growth record demonstrates the value of external openness. Though countries can grow by expanding insulated domestic markets, such growth takes longer. India does not have that kind of luxury. Protectionism does not serve India’s desire for rapid economic growth or for increased geopolitical influence.
While India manages these economic tests, preserving social stability in the face of its cross-cutting internal cleavages remains a persistent challenge. Modi has embarked on the unprecedented experiment of transforming religious Hinduism into political Hinduism, an experiment that seeks to consolidate the Hindu electorate into a unified vote bank that will support his party in perpetuity. Whether this revolution succeeds without disenfranchising India’s large minority groups and deepening its significant north-south divide remains to be seen.
India will gradually increase in power, becoming the world’s third-largest economy during the next ten to twenty years. Yet it will also continue to be marked by the same paradox that characterizes China today — having a large economic mass that does not translate into high levels of distributed prosperity. India’s journey towards true great power capabilities is thus likely to be long and arduous.
This article was originally published on the East Asia Forum.
Ashley J. Tellis is the Tata Chair for Strategic Affairs and a senior fellow at the Carnegie Endowment for International Peace.
