Prospects for India’s Economic Expansion in the Indo-Pacific Era

Since Independence, India has consistently maintained a democratic system.

By Makoto Kojima


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Since Independence, India has consistently maintained a democratic system. After the introduction of economic reforms in 1991, India saw an economic expansion led by the rise of its service sector. In recent years, India has achieved economic growth comparable to that of China, but in contrast to China, India’s working-age population is expected to grow over the long term. In 2014, it saw the birth of the Modi administration of the Bharatiya Janata Party (BJP), a Hindu nationalist party.

The administration aspired for strong growth accompanied by the transformation and raising the bottom of Indian society, through the promotion of “Digital India” and the implementation of Goods and Service Tax (GST). Meanwhile, reforms in the manufacturing and agricultural industries have not advanced and eventually led to a slowdown in economic growth.

The second Modi administration started in 2019. By its second year, it faced headwinds from the COVID-19 pandemic and conflicts at the India-China border in the Ladakh region.

The administration began new efforts to achieve sustainable growth while responding to the pandemic by implementing lockdowns and vaccination rollouts. The India-China border dispute led to the rise in India’s anti-China sentiment, compelling India, which has strategic autonomy as its basic diplomatic policy, to be associated with the Quad framework. As we enter the Indo-Pacific era, the situation will call for Japan to further strengthen its ties with India.

Ⅰ.The Rise of a Large Democratic Nation

1.Economic development under a democratic system

After attaining its independence, India had long adhered to the principles of public sector expansion as the main driver of the economy, while it applied extensive economic control of the private sector. India’s economic growth hovered around 3.5% (Hindu rate of growth) under the Mixed-Economy System.

As India’s economy stalled against the backdrop of drastic changes in its internal and external environment, the government introduced economic reforms in July 1991. In conjunction with domestic deregulation, the government adopted outward-oriented policies and promoted liberalization of trade and direct investments.

India saw a sudden activation of corporate competition between companies, which included the newly risen conglomerates, and began to achieve economic expansion.

China turned to reform and opening-up at the end of 1978 and has since achieved economic growth of over 10% over the long term. Following China, India introduced economic reforms in the 1990s, achieving high growth in the 5% range in the 1990s and 7% in the 2000s. As a result, the percentage of people below the poverty line fell to 21.9% in 2011, from 45.3% in 1993.

In 2014-2018, India recorded a GDP growth rate that is equivalent to or higher than that of China. Though it has temporarily experienced a setback due to the COVID-19 pandemic, India’s economic growth is expected to continue to exceed that of China in the foreseeable future. (Fig. 1)

Both India and China have huge populations of 1.4 billion, but the decisive difference between them is that India is indisputably a major democratic nation, with incredibly large diversity among language, religion, caste, and regions.

This year marks the 75th anniversary of India’s independence. Since its independence, there has not been a single military coup d’état in India. Under a democratic rule to have peaceful transitions of power by holding general elections, India has so far held 17 general elections. Though there are often findings of political corruption and rampant election fraud, amazingly there has never been a case of mudslinging in which an administration tried to overturn election results.*1

For newly Independent India, the establishment of a democratic system was its long-held wish but at the same time a risky bet. The first general election was held in 1952. The administrators had to make painstaking efforts to gather names and other information on 160 million voters out of the population of nearly 390 million to create a list of India’s first voters.

At that time, 85% of the electorate was illiterate, so the country adopted a voting system in which voters put a stamp on the names of the candidates and the party symbol on the ballot paper*2.

To avoid fraudulent elections, the Election Commission, whose neutrality and independence are guaranteed by the constitution, is in charge of running elections. A large number of security forces and government officials are mobilized during elections. Nowadays, India has switched to battery-powered electronic voting systems that are in line with the national situation there, to avoid flaws in paper ballots.

One of the reasons why the democratic system has taken root in India is that its society has a wide diversity that can otherwise lead to social divisions. Before independence, there were more than 500 princely states other than the provinces of India (the territories under the direct control of the United Kingdom). Given this history, each state had its own identity, and the constitution gave state governments great authority, which meant that an authoritarian central government would not have worked in India.

Even if it may take time to settle election results, the reality in India is that there is no other option to govern other than applying democratic rules through elections.

2.Demographic dynamics

The Indian Ocean has long been a marine route where trade and people come and go. Therefore, Indians have a long history of migrating overseas. Furthermore, in the era of globalization, overseas Indians are all over the world across developed and emerging countries.

According to data from the Ministry of Foreign Affairs of India, as of 2020, the number of Non-Resident Indians, and Overseas Citizen of India (either of one’s parents, grandparents, or great grandparents were born and resided in India), was 32.1 million. The number one migrant destination for Indians is the U.S. (4.16 million), the second is UAE (3.32 million), and the third is Malaysia (2.99 million).

The economic and social status of the Indian diaspora is generally high, and they form a successful community. Many Indian immigrants living in the U.S. are highly educated and professional, and their annual income per household is twice the average of the country. There are numerous examples of Indian-born human resources playing active roles at top global companies such as Microsoft, Google, IBM, Novartis, etc.

It can be said that this is because the diversity of the Indian society has refined its members’ cross-cultural understanding and formed the foundations for producing human resources who can demonstrate management abilities in various regions. In fact, Indians overseas are an important part of supporting India’s economic development as they bring knowledge and technologies, and markets to their home country.*3

Furthermore, India’s population is much younger than that of China. India’s average age (median age) is 28.1 years compared to China’s 37.4 years. A growing share of the working-age population among the total population is beneficial to a country’s economic development, but China has already lost such a demographic dividend (fig. 2). Although India’s total fertility rate is well below the replacement level fertility of 2.1, India is still set to enjoy the demographic dividend until about 2040.

In fact, in China, the working-age population itself has been declining since around 2015, while in India it is expected to grow until 2050. The United Nations 2019 forecast saw China’s total population to peak in 2030, but it is inevitable that the decline will happen earlier than expected.*4

3.Characteristics and issues of India’s development model

India’s manufacturing industry has a long history compared to other Asian countries. Currently, it produces 100 million tons of steel, as much as Japan, and is the fifth largest automobile producer following Germany. It is also the global manufacturing base for pharmaceuticals. However, since the 1990s under the economic reform, the driving force of India has not been the manufacturing sector but the service sector.

The service sector’s share of GDP during the period from 1991 to 2017 jumped from 44.1% to 52.8%. Employment also increased from 20.5% to 31%. Meanwhile, the percentage of GDP of the manufacturing sector, which excludes construction and electricity, gas, and water, from the industrial sector, remained around15% to 16% and the sector’s employment has hovered at around 12% since 1980.*5

Within the service sector, India saw significant growth in the IT industry (software and business services), telecommunications, bank, insurance, and other industries characterized by non-face-to-face services transactions. The IT industry, which has emerged as a new face of India’s economy, is an example of an industry that has succeeded by utilizing the country’s human resources in science and engineering and workers who are fluent in English while also taking advantage of the globalization wave.

India’s IT industry is a typical export-led industry. Its annual growth was about 50% in the 1990s and about 30% in the 2000s. Its export value in FY 2020 was 149.2 billion USD, which is about 30% of the total export value of India’s goods and services.

On the other hand, India’s industrial sector has generally remained a supporting player in driving the economy. In the labor-intensive apparel exports, it is behind Bangladesh.

This is not only because of the lack of infrastructure and the high hurdles for securing industrial lands but also due to long-established laws that require permission from the state government to lay off and dismiss employees at industrial establishments with 100 or more employees. Since the early stages of independence, numerous labor laws that were inclined to protect industrial workers have been put in place, which has hindered the expansion of the labor-intensive manufacturing industry.

Ⅱ.Transformation of the Indian economy under the Modi Administration

1.Achievements and challenges during the first term

The Bharatiya Janata Party (BJP) won by a landslide in the 16th general election held from April to May 2014, and Narendra Modi, who was the chief minister of Gujarat, became the prime minister. BJP is a political party whose support body is the Rashtriya Swayamsevak Sangh (RSS), which advocates Hindu nationalism, and has the slogan “One India, Preeminent India.”

Therefore, the major aim of the Modi administration’s economic policy was to realize strong economic growth accompanied by the transformation and raising the bottom of Indian society. Under Modi’s strong leadership, his administration helped improve the state of the macroeconomy and led to various economic reforms.

As part of its social reform, the administration guaranteed 100 days of employment for adults from rural areas looking for unskilled labor, under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). It also carried over the anti-poverty measures of the United Progressive Alliance (UPA) era such as the National Food Security Act (NFSA) which offers subsidized grains to two-thirds of the population.

In addition, the Modi administration implemented the Clean India initiative, which promotes the installation of toilets in rural areas to eliminate the harmful effects of conventional lifestyles, and free installations of LP gas in poor households as a measure against indoor air pollution caused by cooking. Seventy million households have benefitted from the latter as of February 2019.*6

As part of its Digital India initiative, the Modi administration vigorously promoted the unique identification number (Aadhaar) system, which was introduced in 2010 under the former UPA administration. As a result, under the system, numbers were issued for more than 1.2 billion people, opening the door to financial inclusion and direct benefit transfers. NREGA, NFSA, LP gas subsidies, scholarships, and other programs are utilizing direct benefit transfers which allow direct subsidy payments to beneficiaries through accounts linked to Aadhaar numbers.

Furthermore, under the leadership of the Modi administration, two important reforms that had not previously been realized were implemented. One is the introduction of the Goods & Service Tax (GST) and the other is the enactment of the Insolvency and Bankruptcy Code (IBC).

GST was a landmark measure that unified various indirect taxes. Although it required a constitutional amendment to enact, it was realized in 2016 despite the administration facing a “twisted parliament.” Regarding IBC, in the past, when a company went bankrupt in India, it took a long time to resolve the issue, and in many cases, the result was usually unproductive. IBC, which was also enforced in 2016 helped improve this situation.

Meanwhile, to make the manufacturing industry the other engine of growth, the administration launched the “Make in India” initiative and targeted to raise its share of GDP from the previous levels of 15%-16% to 25% by 2022.

Starting in 2018, the manufacturing sector gradually shifted to domestic production. However, with an increased tariff that included parts, and as the initiative lacked focus, the government fell far short of its target. The same went for its agriculture program that aimed to double the income for farmers by 2022.

This initiative was limited to populist policies such as raising the minimum support price (MSP) for the government to purchase agricultural products and provide income support and fell short of the target as well. Economic growth under the first Modi administration peaked at 8.3% in FY2016 and fell to the 6% level in FY2017 and FY18, partly because of the credit crunch of financial institutions against the backdrop of bad debts in the infrastructure sector.

2.Response to the COVID -19 pandemic

The BJP won the 2019 general election and Modi was set for a second term. The administration pledged to invest 102 trillion INR (about $ 14 trillion) in infrastructure over the next five years aiming to become the world’s third-largest economy by 2030.

However, what it implemented in its first year were two political agendas set in the BJP manifesto: the withdrawal of Article 370 of the Constitution, which granted special autonomy to the state of Jammu and Kashmir, and the enactment of the Citizenship (Amendment) Act, 2019 to give nationality to non-Muslim migrants. With the ensuing political turmoil, economic growth plummeted to 4.0% in 2019. The following year, the government faced two headwinds: the pandemic and the border dispute with China in the Ladakh region.

The COVID -19 pandemic hit India in two waves: the first wave lasted from March 21, 2020, through February 2021, and the second wave from March through December 2021 (Fig. 3).

As of the end of December 2021, the total number of cases of COVID -19 reached 41.3 million, the second largest following the U.S., and the total number of deaths was 4.95 million, behind the U.S. and Brazil. The daily number of infections and deaths in India was significantly higher in the second wave than in the first wave.

However, in the first wave, the nationwide lockdown was carried out extensively from the end of March 2020, at the early stage of the pandemic. Thus, in terms of disturbance in the lives of the people, the first wave was by far larger (Fig. 4). In fact, India’s economic growth rate was -7.3% in 2020, the worst record since independence.

The second wave was started by the Delta variant first confirmed in Maharashtra. During the peak period from April through May 2021, the number of daily cases reached as much as 400,000 and daily deaths reached 4,000. Exacerbated by the lack of medical oxygen, the wave caused social turmoil. However, the government avoided a nationwide lockdown out of concern for economic impacts. Implementation of lockdown was left up to the state governments, while the central government focused on vaccine rollouts.

At the time, India had been active in vaccine diplomacy as one of the world’s leading vaccine suppliers. However, the central government had restricted exports and rolled out free vaccine programs at central and state government facilities.

By the end of November of the same year, 790 million (79% of all adults) people received their first shots, and 450 million (52.2%) people received their second shots*7. The daily cases fell to 10,000 by the end of that year. Various indicators such as the Index of Industrial Production (IIP), GST collections, and power consumption have been showing a recovery trend since around August 2020, and the GDP growth in FY2021 is expected to exceed 8%.

However, those hardest hit by the pandemic were the low-skilled and low-paid workers in the informal sectors such as unorganized sectors and non-regular employment. An estimated 139 million migrant workers from rural areas come to the cities, and many of them lost their jobs during the nationwide lockdown during the first wave.

Thus, it is likely that the disguised unemployment in rural areas is not fully reflected in the unemployment rate. In addition, the lockdown caused the schools to close, and while schools tested with online education, most children in the rural areas did not have devices and were unfortunately left behind.*8

3.Efforts towards sustainable growth

Despite the pandemic, the Modi administration has continued vigorously with its economic reforms. In May 2020, it introduced a 21 trillion-rupee (about 32 trillion JPY) package, which is equivalent to 10% of GDP, as a fiscal impetus to respond to people’s plight under the lockdown.

But the measure dubbed the “Self-reliant India Mission,” was more than just a relief package. It aimed at structural reforms with the view to enhance India’s self-reliance, targeting eight industrial sectors (coal, mining, national defense, civil aviation, electricity, social infrastructure, space, nuclear energy) and the agriculture sector.

As part of the implementation process of the package, the administration announced three major areas of reforms in the manufacturing and agriculture industries that it could not launch during its first term: the Production-linked Incentive (PLI) Scheme, labor law reform, and enactment of three agriculture acts.

The PLI scheme, which aims to realize the “Make in India” initiative, is a subsidy program that encourages domestic production, with the goal to build a world-class manufacturing hub in India. A budget of 1.76 trillion INR from the FY2021 budget was allocated to 13 manufacturing sectors, and by the end of 2021, the program expanded to cover semiconductors.

Eligible domestic and foreign companies would receive an incentive of 4-6% on incremental sales throughout the five years. In addition, the labor reform law, which was a pending issue, was enacted in September 2021 during the middle of the pandemic.

Aiming to improve the rigid old labor law that was hindering the expansion of the manufacturing industry, 29 complicated labor laws were consolidated into four labor codes. The size of the industrial establishments that require state government permission to lay off or dismiss workers was raised from 100 employees to 300 employees or more.

Around the same time, the administration enacted agriculture-related laws. Until then, agricultural products had to pass through a designated market (the mandi system) under the control of the state government, and farmers were deprived of the freedom to market their produce. The three agricultural laws aimed at breaking such restrictions.

However, after their enactment, opposition movements unfolded persistently in agriculturally advanced states such as Punjab and Haryana, among wealthy farmers who have enjoyed significant vested interests under the existing system. As a result, the laws were eventually withdrawn in November 2021. The political skills of the Modi administration are being questioned as to whether it should implement reforms that involve breaking vested interests.

Meanwhile, Modi’s active efforts toward economic reforms have had a positive effect on attracting foreign investments, and foreign direct investment (FDI) in India has been steadily expanding since FY2014.*9 In fact, in 2020, during the pandemic, FDI in India increased by 14% year-on-year to 57 billion USD, while global FDI fell by 42%.*10

Furthermore, start-up companies are booming in India. With the introduction of tax incentives in 2016, the number of start-up companies in India has increased rapidly, reaching 14,000 in 2021. India also has 44 unicorn companies (an unlisted company with a corporate value of more than $ 1 billion), ranking third after the U.S which has 487, and China which has 301.

In its FY2022 budget, the year marking the 75th anniversary of India’s independence, the government set out the direction of its economic policy for the next 25 years. It included huge infrastructure development that is diverse and seamless as a driving force for sustainable growth.

Furthermore, the government stressed the expansion of the manufacturing industry by utilizing the PL scheme and achieving a green economy. It pledged to increase the share of renewable energy to 60% by 2030 by installing 280,000 megawatts worth of solar panels and promoting other ecosystems.

Ⅲ.The dawn of the Indo-Pacific era

1.Ripples of India-China border conflict

There was a time in India, when leaders like Swami Vivekananda, a world-famous religious leader of modern India who inspired the Hindu revival movement and the Indian nationalism movement, and Vallabhbhai Patel, the Home Minister of India at the beginning of independence, dubbed the Bismarck of India who sought to unify India, had discussed the threats of China.*11

However, under the leadership of Jawaharlal Nehru, India’s policy toward China was extremely friendly from beginning to end. India advocated non-alignment and was also the first non-communist country to approve the People’s Republic of China. It responded to China’s invasion of Tibet in October 1950 with an appeasement policy. However, its friendly stance toward China was spectacularly shattered in the 1962 border war.

While India’s closest ally during the Cold War era was the former Soviet Union, in the post-Cold War era, India’s relations with the U.S. improved drastically as the two countries grew closer. However, to this day, India’s diplomatic tone has consistently been that of strategic autonomy, succeeding in the past diplomacy of non-alignment.

India has two faces as an India-Pacific coastal nation and a Eurasian continental nation because of its geographical destiny*12. As China strengthens its influence on the neighboring countries surrounding India, in what is referred to as China’s “string of pearls” strategy in the Indian Ocean, India has deepened its alliance with Japan, U.S., and Australia, and it is becoming a major force in the “Free and Open Indo-Pacific (FOIP).”

On the other hand, in 2015, as part of the Eurasia continent, India officially joined the Shanghai Cooperation Organiation, a multilateral organization that includes China and Russia.


From the 21st Century onwards, India-China trade rapidly expanded. The Modi administration’s policy toward China has been a pragmatic one. It chose to separate its strategic and economic relations with China. When the Indian and Chinese troops had a two-month standoff in Doklam near the Bhutan border in 2017, the relationship between the two countries suddenly fell into a tense situation*13.

However, later, an informal top-level meeting was held in Wuhan, China, in April 2018 and in Chennai, India, in October 2019 to restore and foster trust between the two countries. At the ASEAN Regional Forum (Shangri-La Dialogue) held in June 2018, Prime Minister Modi said that India’s commitment to FOIP was not targeted at a specific country, dismissing the claim that FOIP was a network to counter China.

However, in June 2020, the India-China conflict broke out in the Ladakh region, causing many casualties. This led to the rise of anti-Chinese nationalism that had been smoldering in India. The result was a burst of movement to boycott Chinese products and investments from China that even involved industrial circles . The relationship of trust that had been fostered through the two summits collapsed, and India was forced to make a major shift away from China. It seemed like this was a major strategic miscalculation on part of China.

As a result, while maintaining its commitment to non-alignment and strategic autonomy, India has taken a leap toward the FOIP framework, which was created in response to China’s rise. Furthermore, India was also pushed toward joining the Quad, a strategic dialogue between Japan, the U.S. Australia, and India.

2.Quad revival and its direction

Quad 1.0 was originally formed in 2007 after the 2004 Indian Ocean tsunami but put to a halt in 2008 following the withdrawal of Australia. Subsequently, in 2017, an agreement was reached to restart Quad 2.0 under the initiative of Japan, and the first foreign ministers’ meeting was held in September 2019. In 2015, Japan formally participated in the annual Malabar naval exercises held between the U.S. and India, joined later by Australia in 2020.

Following the first online summit meeting (March 2021), a face-to-face summit meeting was held in Washington D.C. in September of the same year. This was followed by another online summit meeting in January of this year. While AUKUS (the trilateral security framework of the U.S., Britain, and Australia), formed in September last year, is a de facto military alliance, Quad aims to build a soft security mechanism.

The Quad’s target issues are to respond to the threats posed by China to the maritime order of the Southeast China Sea, promote a rules-based order for the Indo-Pacific region, and strengthen cooperation in the fields of climate change, space, and cyber. Moreover, the Quad’s efforts have extended to building a resilient supply chain in the field of technology, public health, semiconductor, and clean energy as it monitors the risks of supply chains that rely on China.

In April 2021, Japan, Australia, and India launched a Supply Chain Resilience Initiative (SCRI). In the current situation where each member of the Quad has formed significant economic ties with China, the most anticipated purpose of the Quad is the formation of a geopolitical economy in which we see integrations of security issues and economic interests.*14

The members of the Quad share common values of democracy, market economy, and diversity. India’s growing national power, self-sustaining military capabilities, and its role as a “breakwater” in the Indo-Pacific make India an important part of the Quad.

China’s priority areas are the South China Sea and Taiwan, so India’s active involvement in the Quad means that the members can form geopolitical pressure on China from two fronts, East and West*15. Unlike China, where a population decline is a concern, India, which is a democratic power, is expected to continue to see its working-age population growth over the long term.

The consumer market and the opportunities it provides may contribute to the revitalization of the world economy. In that sense, it can be argued that India is the anchor in the security and economic prosperity of the Indo-Pacific.

Although India is not allied with Japan, the U.S., and Australia, it is deepening its ties with them in terms of both security and economy. Trade with the U.S., for both goods and services, constitutes India’s largest bilateral trade.

At the same time, besides signing the Logistic Exchange Memorandum of Agreement (LEMOA) in 2016, the two countries have formed a wide range of strategic relationships including the “2+2” defense and foreign ministers’ dialogue which started in 2018, and the Communications, Compatibility and Security Agreement (COMCASA) formed in 2018, which allows real-time data-sharing between the U.S. and Indian militaries on matters of strategies. The deepening of the ties between the two countries will enhance Quad.

India and Australia signed the Mutual Logistics Support Arrangement (MLSA) akin to the LEMOA in 2020, which allows the mutual exchange of supplies and services between the armed forces, forming a Comprehensive Strategic Partnership. In 2021, the two countries began the 2+2 dialogue, bringing them close to forming the Comprehensive Economic Cooperation Agreement (CECA).

As it faces China’s high-pressure diplomatic offensive, Australia has clearly shown its resolute stance against China on national security grounds rather than economic considerations. It then comes as no surprise that Austria would seek stronger ties with India, a like-minded democratic state across the Indian Ocean.

3.Seeking Further Expansion of Japan-India Relations

Apart from the U.S., which has signed a security treaty with Japan, Japan maintains a “2+2” dialogue, agreements on the transfer of defense equipment and technology, information security agreements, and a similar military logistics sharing pact-formally known as the Acquisition and Cross-Servicing Agreement (ACSA) -with India and Australia.

Furthermore, Japan and Australia have agreed on “asset protection missions” to protect each other’s fleet and fighters and signed a Reciprocal Access Agreement which facilitates mutual visits by SDF personnel and Australian troops. The two countries have evolved into forming a quasi-alliance.

In 2006, Japan and India formed a “Strategic and Global partnership” and 2 + 2 dialogues have been held every year since 2009. Furthermore, in 2014, the two countries upgraded their bilateral relations to “Special Strategic and Global Partnership,” leading the way to annual joint exercises between the Japan Coast Guard and the Maritime Self-Defense Force, and the Indian forces.

Japan-India Cyber Dialogue has been held since 2012 to discuss issues of information and communications technology (ICT). Ministers from both countries have exchanged memorandums of cooperation on digital partnerships, helping build mutual trust between the two countries.

There is still scope for improvement and expansion of bilateral relations on the economic front. Japan has played a major role in India’s infrastructure development through the provision of Official Development Assistance (ODA), and India has high expectations of Japan as a development partner.

In the field of direct investment, there is a successful case of Suzuki, which led the Indian automobile industry, that subsequently led the way to other successes of Japanese companies in India in a wide range of fields. Given the growth potential of the enormous size of India’s market, there is still much room for Japanese companies to expand there.

Trade of goods and services has been noticeably stagnant. Despite forming the Economic Partnership Agreement (EPA) in 2011, Japan-India trade has remained stagnant with the latter running a trade deficit. The total trade volume is lower than that of India and South Korea and remains less than one-fifth of the Indian-China trade.

Japan and India should find ways through new initiatives to expand trade in areas of strength for India, such as pharmaceuticals, and build partnerships in the areas of next-generation renewable energy, manufacturing, and technologies.

In any case, what is ultimately necessary to form a foundation for expanding Japan-India relations is to deepen mutual understanding through active personnel exchanges. This will also help promote partnership in the field of IT between Japan and India, which will be desperately needed in the future*16.

The lack of personnel exchanges should not be the missing link that hinders the further expansion of bilateral relations. The two countries should make urgent efforts to expand exchanges of personnel at a wide range of levels from industry, academia, and government.


*1 The firm roots of parliamentary democracy in India were evident in the 2004 general election when the ruling BJP (Bharatiya Janata Party) government unexpectedly lost to the United Progressive Alliance (UPA) led by the Indian National Congress (INC). Prime Minister Atal Bihari Vajpayee noted that although his government was defeated, Indian democracy has triumphed.

*2 Nandan Nilekani & Viral Shah, Rebooting India: Realizing a Billion Aspirations (Penguin Random house: India, 2015; Allen Lane: UK. 2016).

*3 Since 2008, India has had the largest remittance by overseas migrants. In 2020, India’s total remittance amounted to $83 billion, followed by China’s $60 billion, Mexico’s $43 billion, and the Philippines’ $35 billion. (World Bank, Migration and Development Brief, 34. May 2021).

*4 Despite the withdrawal of the one-child policy in China in 2016, the annual number of births has been declining year by year since then. The number of births in 2020 was 10.62 million, a 40% decrease compared to 2016. The total fertility rate also fell to 0.75.
In terms of the aging rate of the population, according to the United Nations statistics, the rate of people aged 65 and over was 12.0% in 2020. However, according to the latest announcement by the Chinese government, the rate was 14.2% in 2021, indicating that China is aging faster than previously expected. JETRO Business Tanshin (in Japanese, October 21,2021, February 2, 2022).

*5 GDP figures by sectors were based on from the Central Statistical Office, and for figures on employment were based on Santosh Mehrotra and Jajati K. Parida, “India’s Employment Crisis: Rising Education Levels and Falling Non-Agricultural Job Growth,” CSE Working Paper, April 2019, Azim Premji University.

*6 The Economic Times, March 8, 2019.

*7 Department of Economic Affairs, Monthly Economic Review, November 2021, Ministry of Finance, Government of India.

*8 At the end of November of the same year, a highly infectious Omicron strain appeared, and since the beginning of 2022, the number of infected people has increased explosively, which looked like the arrival of a third wave. However, the cases went down drastically in February.

*9 India jumped to 63rd position (out of 190 countries.) in World Bank’s Ease of Doing Business in 2019, up from 142nd in 2014. (World Bank, Doing Business 2019: Training for Reform, Washington DC.)

*10 UNCTAD, Investment Trends Monitor. January 2021.

*11 Walter K. Andersen and Shridhar D Damle. The RSS: A View to the Inside (Gurgaon: Penguin Random House India, 2018). Chapter 9.

*12 Hemant Krishnan Singh and Arun Sahgal. “The Indo-Pacific: A Realist Indian Perspective,” DPG Policy Paper, July 12, 2018.

*13 Kojima Makoto,  The geopolitical significance of India-China standoff along the Bhutan border (In Japanese), Takushoku University International Forum, September 24, 2017.

*14 Brahma Chellaney. “The Quad needs an economic pillar to stand on.” Nikkei Asia, January 10, 2022.

*15 Hemant Krishnan Singh, Arun Sahgal and Ambuj Sahu, “The Quad’s Present and Future: A Geostrategic Perspective from Delhi.” DPG Policy Report, Vol. VI Issue 25. August 21, 2021.

*16 According to estimates by the Ministry of Economy, Trade and Industry, by 2030 Japan will see a shortage of 450,000 IT engineers (medium scenario) and 1.24 million AI engineers (average scenario), “Research on IT human resources demand and supply,”  (April 2019, in Japanese.).

This article is a translation of the Japanese original published in the May/June 2022 issue of the “World Economic Review” magazine.

Makoto Kojima
Born in 1946. Professor Emeritus of Takushoku University; Received Ph.D. in Economics from Keio University; Senior Researcher at Japan-India Association Center for Contemporary Indian Studies; author of “Software Industry in India (in Japanese published by Toyo Keizai Inc., 2004) “Tata Conglomerate” (same, 2008) “India: Growth Business Map] (cowritten and-coedited, in Japanese, Nihon Keizai Shimbun Publishing Co., Ltd., 2010), “India VS China “(Co-written and co-edited, in Japanese, 2010) among others.


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