The new geo-economics India must prepare to compete in

Economic diplomacy must stand alongside defence and foreign policy as a routine instrument of statecraft.

At the dawn of the century the United States commanded more than a quarter of global GDP in purchasing power parity terms, China was under four percent, and India scarcely two. By 2010 the American share had slipped to just over 22 percent, China had climbed to nearly ten, and India hovered close to three. A decade later, China reached more than 16 percent, almost on par with the United States, while India had risen to about seven. Today the figures are starker still: China at 19 percent, the United States at 14.7 percent, and India at 8.5 percent. In one generation, the centre of economic weight has tilted from West to East.

India’s Growing Share of GDP

China has already used its rise to entrench itself in manufacturing, logistics and technology ecosystems. India’s share has risen sharply too, but the real question is whether this scale translates into influence. Purchasing power parity captures economic volume, but it does not reveal productivity, institutional depth or capacity for innovation at scale. Size is a platform, not a guarantee. China’s growth story shows both the possibilities and the pitfalls. India must now focus on reforms that turn aggregate output into scalable and resilient capability. Without this, rising shares in world GDP will remain an accounting fact, not a strategic asset.

The first imperative is to move beyond the low-cost advantage and jugaad thinking that defined earlier growth. Future progress requires high-productivity manufacturing, stronger capital formation, knowledge-intensive services and domestic research and development. That will only come with predictable land, labour and energy policies, more efficient logistics, skill-building tied to industry demand, and capital markets that can finance long-term bets. India’s ability to attract sustained global capital inflows, deepen its bond and debt markets and build credibility in institutional finance will determine whether scale converts into strength.

Unlocking India’s Potential

Human capital remains the binding constraint. Health systems and education are in urgent need of relevance at scale. Vocational pathways and mobility of talent must become national priorities. India’s per capita income is still far below many economies, and the demographic dividend can become a liability if jobs do not grow in step with the workforce. We should not confuse aggregate GDP size with per capita prosperity, particularly if we set aside the wealth held by the richest few.

Climate change is turning food systems and water resources into arenas of strategic vulnerability with direct implications for growth and stability. India must begin to view agriculture, agri-tech and water security as geoeconomic priorities rather than treating them narrowly as domestic welfare concerns.

India’s Critical Frontiers

The foundation of long-term ambition lies in institutions. Contract enforcement, judicial predictability, data governance and regulatory credibility are not glamorous, but they are the bedrock on which investors and partners decide to commit capital and technology. Without them, trust falters and opportunity slips away.

Geoeconomics is now as important as geopolitics. A larger share of global GDP creates leverage only when India is seen as a reliable supplier, investor and partner. Stronger trade frameworks, high-standard manufacturing, transparent rules and secure supply lines are essential. Economic diplomacy must stand alongside defence and foreign policy as a routine instrument of statecraft. Fiscal strategy must also evolve. Buffers are necessary, but prudence must be balanced with catalytic investment. Sovereign or quasi-sovereign vehicles can back semiconductors, clean technology, logistics and advanced skills. The goal is to seed tomorrow’s champions, not scatter subsidies for applause.

Technology leadership is another frontier. Control over data flows, cybersecurity, artificial intelligence and digital trade rules has become the new frontline of geoeconomics, yet India’s stance has been hesitant and inconsistent. Despite having the potential to make digital infrastructure a national strength, policy swings between protectionism and selective openness on data localisation, digital trade and privacy have created uncertainties. Unless India assumes leadership in setting global digital norms, its scale advantages will remain underexploited. A nation cannot aspire to leadership if it consumes technology designed elsewhere.

Long-term Industrial Strategy for India

Two misconceptions must be avoided. A larger share of world GDP does not equate to dominance. It brings exposure as much as opportunity. And China’s rise is not a template to copy. Its demographic dividend, urbanisation and export-led policies were unique to its moment in history and carried high costs. India’s path must be different, more sustainable, more inclusive and more resilient.

The story told by the numbers is clear. The arithmetic of global GDP has given India more weight. But weight alone does not bend history. Policymaking cannot remain trapped in past hits and misses, or in the comfort of present achievements, if India is to break out of its lower-middle-income reality. Escaping that destiny will demand extraordinary effort, sharper execution and a willingness to imagine new possibilities rather than posture with old ones.

India cannot afford to lurch from one passing initiative to another. What is needed is a focused and credible long-term industrial strategy, flexible enough to adjust to new risks and opportunities, yet disciplined in building exportable models at scale. History does not reward hesitation. The real test is whether we will dare to reform our administrative machinery and make it accountable and relevant for the demands of twenty-first century governance.

(Srinath Sridharan is Author, Policy Researcher & Corporate Advisor, Twitter: @ssmumbai.)

Views are personal, and do not represent the stand of this publication.