As the International Monetary Fund (IMF) predicts that India will soon become the world’s third-largest economy, questions about the country’s per capita income continue to linger. India’s nominal per capita income stands at a modest $3,000, while purchasing power parity (PPP) pushes it to a still-conservative $9,000. However, the narrative of India’s economic trajectory is steeped in historical context and contemporary global dynamics.
A History of Penury and Recovery
Before British colonial rule, India’s per capita income was comparable to that of Western Europe. However, nearly 200 years of colonial exploitation left the country impoverished. By 1947, when India gained independence, per capita income had plummeted to a fraction of its Western counterparts. The following decades of Congress-led socialist economic policies saw slow recovery, leaving a significant portion of the population in poverty.
Post-independence, India’s poverty rate stood at a staggering 80%, with famines being a grim reality during British rule. Since then, the country has made remarkable strides. Poverty has dropped to around 10% today, with no major famines recorded post-independence. As India’s GDP continues to grow and its population stabilizes at 1.5 billion, the stage is set for significant improvements in per capita income.
Navigating a Complex Global Landscape
India’s economic ascent comes at a time of heightened geopolitical tensions. The rivalry between the United States and China over trade and technology is reshaping global alliances. Former U.S. President Donald Trump’s pledge to impose tariffs on Chinese imports led to retaliatory measures from Beijing, including a ban on exporting critical rare earth minerals. These minerals, essential for semiconductors, solar cells, and military applications, underscore the high stakes of the U.S.-China competition.
Simultaneously, European nations have raised import duties on Chinese electric vehicles, prompting threats of retaliatory tariffs from China. Amid this geopolitical chessboard, India emerges as a pivotal player. With its vast and growing market, India provides an alternative for Chinese exports curtailed by Western restrictions. At the same time, deepening security collaborations with the United States strengthen its position as a strategic partner.
India-China Relations: A New Chapter?
Recent developments in India-China relations signal a thaw after years of border tensions. National Security Advisor Ajit Doval’s visit to Beijing on December 18 marked the first formal dialogue between the two nations’ Special Representatives in five years. Both sides emphasized the need for stability along the border and agreed to resume initiatives like the Kailash Mansarovar Yatra, transborder river cooperation, and the Nathula border trade.
China’s acknowledgment of India’s growing significance in global trade is evident. Apple’s decision to expand iPhone production in India is a case in point. By 2027, India is expected to produce 30% of the world’s iPhones, up from negligible levels just five years ago. Meanwhile, China’s share in global iPhone production is projected to decline from 90% to 55%.
The Dawn of a New Economic Era
India’s transformation extends beyond manufacturing. Nearly 2,000 Global Capability Centres (GCCs) now operate in the country, serving as hubs for innovation in engineering, R&D, software development, and artificial intelligence. India’s expanding military capabilities, ambitious space program, and thriving startup ecosystem further solidify its standing as a rising global power.
The stock market reflects this optimism. While European markets stagnate, India has witnessed a surge in Initial Public Offerings (IPOs), underlining investor confidence in its economic future.
A Balancing Pivot in Global Power Dynamics
India’s growing economic clout is reshaping perceptions in Washington and Beijing. While its per capita income remains low, the rapid GDP growth and strategic positioning between two superpowers suggest a transformative role in the evolving global order.
The world is taking note of India’s resilience and potential. Despite its colonial past and economic challenges, India is poised to leverage its growth for a more equitable future, serving as a balancing geo-economic pivot in an increasingly polarized world. As the country charts its course, it offers a glimpse of a new world order with India at its core.
