Analyzing the Economic Indicators Behind Narendra Modi's India

In a few days, India is set to begin the biggest democratic election in the world. Approximately 960 million out of 1.4 billion people are able to vote in the upcoming polls. The elections will start on Friday and will run for over a month. Many believe that Narendra Modi will secure a third consecutive five-year term as prime minister.

India, under his leadership, is set to emerge as a strong economic force in the 21st century. This provides a viable option for investors, consumer brands seeking growth, and manufacturers aiming to minimize risks in their supply chains.

In contrast to the deteriorating relations between Beijing and the West, India maintains positive relationships with many major economies. It is actively attracting large companies to establish manufacturing plants within its borders.

So, is the hype around Modi’s India, which remains a largely impoverished country, justified?

Laborers work on a portion of the Coastal Road expressway along Mumbai's coastline.

Laborers work on a portion of the Coastal Road expressway along Mumbai's coastline.

Indranil Mukherjee/AFP/Getty Images

Economic data in India is sometimes unreliable, making it difficult to accurately assess the country's actual situation. However, CNN has created five charts using data from official sources to illustrate India's performance since Modi became Prime Minister in 2014. These charts also highlight the challenges that the next leader will encounter in overseeing the world's fastest growing major economy.

Still very poor

India’s economy was worth $3.7 trillion in 2023, making it the world’s fifth largest, having jumped four spots in the rankings during Modi’s decade in office.

India's economy is expected to grow by at least 6% annually in the next few years. However, experts suggest that in order to become an economic superpower, India should aim for a growth rate of 8% or higher.

As the economy continues to expand, India is projected to rise in the rankings of the world's largest economies. Some analysts even predict that by 2027, India could be the third-largest economy in the world, following only the US and China.

A construction worker carries metal rods during the construction of an elevated water tank in Ajmer, Rajasthan, on January 30, 2024.

A construction worker carries metal rods during the construction of an elevated water tank in Ajmer, Rajasthan, on January 30, 2024.

India has the potential to improve its gross domestic product (GDP) per person, which is a measure of living standards. In 2022, it was ranked at a low 147th place by the World Bank.

According to Guido Cozzi, a professor of macroeconomics at the University of St. Gallen in Switzerland, the economy's growth will have trickle-down effects on per-capita GDP. However, he warns that simply relying on trickle-down economics may not necessarily reduce income inequality. Therefore, policies that promote inclusive growth may be needed.

Building modern India

India is embarking on a major infrastructure overhaul, similar to what China did over thirty years ago. The country is investing billions in constructing roads, ports, airports, and railways. Additionally, private investors are working on the construction of the largest green energy plant in the world.

In the latest federal budget, a significant amount of $134 billion was allocated for capital spending aimed at stimulating economic growth.

Furious construction is happening all over the country, with visible results on the ground. Between 2014 and 2023, India expanded its national highway network by nearly 55,000 kilometers (around 35,000 miles), a 60% increase in overall length. Investing in infrastructure not only creates jobs but also makes doing business easier, benefiting the economy.

Moreover, in recent years, India has developed various tech platforms called digital public infrastructure. These platforms have had a significant impact on improving the lives and businesses of people in the country.

The Aadhaar program, introduced in 2009, has given millions of Indians their first official proof of identity. This initiative has not only created the world's largest biometric database but has also played a significant role in curbing corruption within government welfare schemes.

Another notable platform, the Unified Payments Interface (UPI), enables users to conduct instant transactions by simply scanning a QR code. Widely embraced by individuals across various socio-economic backgrounds, from small coffee shop owners to those in need, UPI has facilitated the influx of millions of dollars into the formal economy.

In September 2023, Prime Minister Modi highlighted a World Bank report stating that India has successfully met its financial inclusion goals within six years due to its digital public infrastructure. This achievement would have normally taken 47 years to accomplish.

India's progress in financial inclusion has positioned it as a stock market superpower.

India's stock market has been reaching new highs, reflecting the enthusiasm for the country's growth prospects. The total value of companies listed on Indian exchanges exceeded $4 trillion at the end of last year.

India is home to two main exchanges: the National Stock Exchange of India (NSE) and the BSE, which is Asia's oldest stock exchange previously called the Bombay Stock Exchange.

Thanks to a strong rally, the NSE has now become the world's sixth largest stock exchange, surpassing the Shenzhen Stock Exchange and the Hong Kong Exchange, according to data from the World Federation of Exchanges in January.

Both individual and institutional investors in India have been pushing the stock market to record highs.

Retail investors in India hold 9% of the equity market value, with foreign investors slightly below at 20%. Analysts predict an increase in foreign investments after the 2024 election.

There is a buzz of activity in factories.

The Modi government is making strong efforts to take advantage of the current trend among companies to reconsider their supply chains. Many international companies are looking to spread out their operations beyond China. They faced challenges during the pandemic and are concerned about the increasing tensions between Beijing and Washington.

A sign board showing the plot information of Foxconn India's production unit at a special economic zone in Sriperumbudur, on the outskirts of Chennai. on December 28, 2021.

A signboard displaying the details of Foxconn India's production unit in a special economic zone in Sriperumbudur, located on the outskirts of Chennai, was seen on December 28, 2021.

Arun Sankar/AFP/Getty Images

India, the third largest economy in Asia, has introduced a production-linked incentive program valued at $26 billion. This initiative aims to encourage companies to establish manufacturing facilities in 14 sectors, such as electronics, automobiles, pharmaceuticals, and medical devices.

This has led to a notable increase in operations by major companies like Foxconn, a key supplier for Apple (AAPL), choosing to expand their presence in India.

Elon Musk, the billionaire, recently mentioned his excitement about meeting Modi in India during an event last week. Although he did not provide a specific date, it is anticipated that the CEO of Tesla (TSLA) will soon make a significant investment in the country. Reports suggest that the electric vehicle manufacturer is currently exploring potential locations for its first factory in Asia, outside of China.

In the past, Apple typically waited seven to eight months after a new model launch before beginning assembly in India. However, this practice changed in September 2022. Apple started producing the latest iPhone 14 models in India within weeks of their global release, signaling a shift in the company's manufacturing strategy.

Analysts are praising Modi's new strategy as a major success. By strengthening manufacturing connections with a tech giant like Apple, India is expected to draw in more global players in the electronics manufacturing industry.

Market research firm Canalys predicts that by the end of 2025, as much as 23% of iPhones will be manufactured in India, a significant increase from the 6% in 2022.

India's economy, much like its democracy, still has room for improvement. If re-elected, Modi will face the significant task of generating millions of jobs for the many impoverished people in the country.

Commuters at Mumbai's Churchgate railway station

Commuters at Mumbai's Churchgate railway station

India, with an average age of 29 years, boasts one of the youngest populations in the world. However, the country has not been able to fully capitalize on the economic advantages of its large and youthful population.

According to a recent report by the International Labour Organization, young educated Indians aged 15 to 29 are facing higher unemployment rates compared to those who have not received any formal education. This indicates a mismatch between their career aspirations and the job opportunities available to them.

The report also highlighted that youth unemployment rates in India have surpassed global levels.

According to a report, the unemployment rate for young Indians with a graduate degree is over 29%, which is almost nine times higher than those who cannot read or write.

The report also mentioned that the Indian economy has not been able to generate sufficient well-paying jobs in non-farm sectors for newly educated young workers, resulting in a high and rising unemployment rate.

Editor's P/S:

India's upcoming election is a significant event, not only for the country but also for the global economy. The election results will have far-reaching implications for India's future and its role in the world. The article provides a comprehensive overview of the country's economic performance under Prime Minister Narendra Modi's leadership, highlighting both the progress made and the challenges that remain. While India has made strides in infrastructure development, financial inclusion, and attracting foreign investment, it continues to face issues with poverty, unemployment, and income inequality. The next leader will need to address these challenges while also continuing to foster economic growth and improve the lives of all Indians.

The article also discusses the potential impact of India's growing economic power on the global stage. India is well-positioned to become a major player in the 21st century economy, and its cooperation with other countries will be essential for addressing global issues such as climate change and terrorism. The election results will shape India's foreign policy and its relationships with other nations, making it an event of great significance not only for India but also for the world.