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At the edge of New Delhi, in the city of Noida, the groundwork for India's economic future is being built. Vast blocks of electronics factories have sprung up there, from a million square foot Dixon Technologies plant staffed by about twenty six thousand workers to a Samsung facility that's turning out
one hundred and twenty million phones a year. This new manufacturing hub is at the heart of a push led by India's Prime Minister Narendra Modi to turn the country into a manufacturing powerhouse and an engine of global economic growth. Here's Mody talking to Congress in Washington last summer.
Today, India is the fifth largest kona.
Okay, and.
India will be the far larger economy soon. We are not only growing bigger, but we are also growing faster.
And already there are some signs that the plan is working. Foreign investment is pouring in, the country's stock market is booming, and manufacturers are ramping up production.
India is posting some of the most robust economic growth rates right now in the world. It's far and away the world's fastest growing major economy on the world stage.
That's Dan Strump, who covers economics and politics from New Delhi for Bloomberg, and he says, there's another big reason analysts and economists are paying attention to India right now.
Why is everybody so interested in India? Well, I mean, of course, one of the biggest reasons is simply that it's not China.
That's because while India's me is speeding up, China's has been slowing down. And with China's strained global trade relations, it looks like India has a unique opportunity to overtake it as the world's largest contributor to growth. But to achieve Prime Minister Modi's most ambitious goals, India still has a lot of work to do, from modernizing its infrastructure, to growing its workforce, to building out its urban centers.
India needs a lot more cities.
This is Goldman Sachs's India economists Santanus and Gupta speaking to the Bloomberg Originals team. There is a lot of progress already happening, but there are crucial problems like water, like traffic, like orbit housing that needs to be solved today. On the show, could a thriving India follow in China's economic footsteps and what will it take to rival its growth? From Bloomberg News. This is the big take. I'm Sarah Holder. So for years China's economy grew at the fastest pace
in the world, but now it slowed down considerably. I asked Dan Strump, What is it about the Indian economy today that has people saying it could see growth at the rate China once did?
On paper, there's actually a lot of similarities. India is now the world's largest country by population, just surpassed China one point four billion people. It has economic growth, which is very scarce around the world right now, and there's a number of other factors working in India's favor. It has what economists referred to as a demographic dividend, which is that it has this sort of young, growing population that is hungry for work and can be put to work,
can be put to productive work. China, of course, has an aging population and a shrinking population as to many developed economies around the world. So all of these kind of factors are coming together to work in India's.
Prime Minister Modi has pledged to capitalize on this potential as he seeks a third term in office, he's promised to take India to the top position in the world and a big part of the plan is to expand India's manufacturing capacity to bring it up to a quarter of the country's GDP. But there's a lot that has to happen first, starting with building better infrastructure.
This is really a big and long standing issue in India. India still lags on a number of metrics, say compared to China, which I mean if you go to say, the sort of manufacturing corridors of southern China, for example, I mean you'll just see world class infrastructure, world class highways. China is of course known for its extremely well developed high speed rail network that took many years to build. And India has long struggled with things like roads. You know,
the quality of its railroads. It has insufficient airports in sufficient ports, and these are the sort of things that you need to attract things like foreign manufacturers. So infrastructure has been a major priority for the Modi administration.
Modi's administration has promised to commit one hundred and forty three trillion rupees the equivalent of well over a trillion dollars to infrastructure in the next few years. Some of that money will go towards new airports. Indio last year had about one hundred and forty eight airports, but they plan to boost the number to two hundred and twenty next year. They're also working on their railways and their roads.
One of the most sort of touted projects when it comes to high speed rail is a forthcoming railway that is meant to connect Gujarat, which is Mody's home state, with Mumbai, which is the financial capital. And this has yet to come online, but it's as much tied project, and the ambition is that it's one of a number of new projects that will kind of help together all of these up and coming Indian industrial and financial centers.
Another project is a major highway that's meant to be connecting Mumbai with New Deli, the capital, and that's actually up and running. Things like that help reduce logistics costs and help reduce the overhead that businesses and investors are paying to do business here, and that's really sort of the benefit that it's hoped gets reaped from investment projects like that.
To see the kind of growth at once, India will also have to drive up its labor force participation, which is currently among the lowest in the world. Only a little over half the country's working age population was working or looking for a job as of twenty twenty two. Rates are even lower for women.
This is a huge problem because they're of course, I mean, you just you need more people to be in the workforce if you want to generate growth. But it's also a huge social problem. I mean, India suffers from high unemployment. So right now, a very large share of its economy is agricultural, and many economists point to the fact that
India's workforce is under educated. There are jobs in the service sector, there are jobs in high tech industries in places like Bangalore hydrobod and then there's and then there's jobs for people in the agricultural sector, which is low skilled labor. But there's there's really a need to increase the share of workers kind of in that in that middle area, right who can do things like working factories in large numbers or manage factories.
It seems like one of the broader goals for growing India's economy is to grow the country's middle class the same way China has been able to. How could that reshape the Indian economy.
So yeah, I mean this is this is absolutely the case. The development of India's middle class is really linked inextricably with building out the manufacturing industry. And the reason for that that many economists point to is that manufacturing is one of the few sectors in an economy that really is able to generate large numbers of jobs and large numbers of jobs for people who have a little bit of education but might not be working in technology companies.
And these are the people that Modi and India kind of need to put to work in order to develop boost the economic growth rate to a level that puts it on track to overtake China.
If they do manage to get more people into the labor force and amp up their manufacturing sector, they'll need to build out their cities. Just thirty six percent of India's population live in cities versus over sixty four percent of China's. I asked Dan how India is thinking about urbanizing.
I think this goes actually right to the infrastructure point. It's not just about serving business, it's about serving cities, and it's about building not just like highways and high speed rail, by metro lines and improved inner city highway links and things like this that are going to attract housing development, for example, that are going to attract people.
I mean out in Neude, just by way of example, we saw a huge new plot of land where you've got what's meant to be a million square foot smartphone factory that's just broken ground right now. Just about a kilometer away or so in the distance, you've got about half a dozen high rises that have just come up that are just under construction that are meant to house a lot of these people to work in this plan. So you know, one sort of begets the other.
But India's still got a lot of catching up to do. It's three point five trillion dollar economy today is only about a fifth of the size of China's. When we come back what India does economic ambitions mean for China and for the rest of the world. We've been speaking with Bloomberg reporter Dan Strump in New Delhi about India's potential to take the mantle from China as the global leader in economic growth. How much does India's success rely
on eating China's lunch. Does India have to actually take jobs, factories, opportunities away from China?
So there's two ways of looking at that. You could make the case that India doesn't need China to slow down to advance, but economic growth is not zero sum, and China and India actually have very robust economic ties, and so a slowing China isn't on all fronts necessarily good for India. I think what certainly, what Modi recognizes and what many foreign investors are kind of keying in on, is that they're is this growing desire around the world
to kind of de risk away from China. We hear a lot of talk of this what's called this China plus one strategy, where you're a big manufacturer or multinational like Apple or Samsung or something that's had a big footprint in China for a long time. You don't necessarily want to pull out of China because you've got, say in the case of Apple, I mean really deep roots there and a massive supply chain that can't really be
replicated overnight anywhere else. But you know, you're mindful of both the slow down happening in China and of the shifting geopolitical wins, and you want an alternative that will take a little bit of a heat off of that relationship. That is where India comes in for many of these companies, and many companies are trying to find a way as well to capitalize on this opportunity.
And is it working so far? Is there a lot more foreign investment flooding into India's sense? It's you know, raised the bar on these economic expectations.
So I think the answer that you would hear is that it's sort of working. It's not a clean one for one dollar for dollar. Everybody's pulling out of China and they're coming into India. It's a lot of that investment that say, might have been going into China. If you know, the world we're in a different place right now. It's getting spread out around the world. Some of it's going to India, but a lot of it's going to
Southeast Asia. Vietnam, for example, is actually taking a lot of investment in manufacturing from companies that might have been investing in China. Of course, Mexico has also been a major recipient of a lot of this investment as well. India is getting some of it, but in many ways what you hear is that India remains a difficult place to do business. There's a lot of barriers to entry. There are complicated tax regimes to contend with, and the
sort of wheels of government in India. You know, they're just grind more slowly, certainly than they do in China, where for better or for worse, one party rule has managed to streamline the economy in a very rapid and swift way.
What will it mean for the US if India is able to deliver on these ambitious economic growth plans?
So what the US season in India? I think is, in the best case scenario, a partner, you know, as a country you can work with, and as a country you can deal with, and you know, as a fellow democracy, as a country with some shared values. So a more economically vibrant India is a counterweight to China, which is
increasingly the US's biggest global rival. So from a strategic point of view, India definitely represents a partner with the US, and it can also represent, you know, a place where a lot of US companies can invest in, and you're seeing a lot of that investment already coming in.
We've been talking a lot about India's potential, but I wanted to ask Dan, doesn't this kind of rapid economic expansion have downsides too.
Just to take the China case, I think it's very well documented that the biggest downsides to its economic expansion were the environmental side effects that came with it. The stories of pollution in places like Beijang and Shanghai. I mean, you're actually seeing that replicated in many Indian cities now, in places like New Delhi, where you know, the pollution is literally the worst in the world. So that's the most obvious downside to growth, and especially to rapid growth.
Of that skill Sodan, You've really helped us understand the scale of India's ambitions, where they're at right now, where they go from here. You've also talked to a lot of analysts and economists who are following what's happening in India really closely. How realistic do they think these growth plans are?
So our colleagues at Bloomberg Economics, they crunch the numbers. Their conclusion is that India actually can overtake China as the world's engine of economic growth, meaning it can be the world's largest contributor to global growth within this decade. Now, that's sort of in a best case scenario. Now, in a slower growth scenario, you would see that happening in
the next decade. So I think that there is a strong belief that India can take this sort of mantle as the world's incremental driver of global growth as China slows down. And you know what that means for India is that it will continue to draw more foreign investment, It will continue to attract more investment from foreign companies, and it will continue to kind of grow as a player on the world stage.
Well, Dan, thank you so much for joining us today and sharing your great reporting.
Well, thank you so much.
This has been The Big Take podcast from Bloomberg News. I'm Sarah Holder. This episode was produced by Alex Suguia. It was edited by Caitlin Kenny and Chris Anstey. It was mixed by Rishi Bijacole. It was fact checked by Naomi. Naomi Shavin is our senior producer. Elizabeth Ponso is our senior editor. Nicole Beemsterbor is our executive producer. Sage Bauman is Bloomberg's head of Podcasts. Please subscribe and review The Big Take wherever you listen to podcasts. It helps new
listeners find the show. Thanks for listening. We'll be back tomorrow