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India Rising: A Regional Power and Global Business Place

Agora Strategy Executive Briefing on economics in India
Agora Strategy Executive Briefing on economics in India

Executive Summary

  • The government led by Prime Minister Narendra Modi is widely expected to win the upcoming general election held from 19 April to 1 June 2024, indicating political and investment stability.

  • With its geopolitical shift towards strategic autonomy and multilateralism, India is strengthening ties with the West and regional blocs like ASEAN while asserting its national interests.

  • Its growth prospects remain strong, supported by initiatives like "Make in India" and infrastructure investments, and allows it to position itself as a major player in global supply chain resilience.

Implications for International Business

  • Due to the strong growth expected in the Indian economy, the Indian corporate sector is likely to have double-digit earnings growth on a sustainable basis for the next couple of years.

  • In particular, opportunities are emerging in generative AI, new energy businesses, and digital space, including e-commerce and payment systems.

State of Play

With more than 945 million voters eligible to cast their ballot, India’s election is the largest democratic exercise in the world. It will be held in seven phases, with final results to be announced on June 4. Current polls point to a win of the National Democratic Alliance (NDA) led by the Prime Minister’s Bharatiya Janata Party (BJP). Especially during his current – second – term, Modi has curbed the independence of the media, the judiciary, and of civil society and targeted opposition figures from Congress and other parties for alleged tax crimes. Moreover, he used last year’s G20 presidency not just to establish India as a shaper of global affairs but also to boost his image at home. That said, unemployment, inflation, and ensuring that the benefits of growth trickle down to the masses are the main domestic concerns. Despite some progress, there is still a huge unmet need for basic services such as healthcare, water and sanitation, education, and energy. At the international level, India has managed to attract significant foreign investment as it steers the middle ground between two competing superpowers. A like-minded democracy favoring the rule of law, Delhi tries not to directly antagonize China while gaining US support.

Key Issues A growing player in its own right and a difficult partner for the EU

India is in the midst of a significant geopolitical repositioning, discarding its old non-alignment policy in favor of strategic autonomy and multilateralism. Its G20 presidency in 2023 turned the country into a leading voice of the Global South, not least through the inclusion of the African Union as the new member of the group. Another significant legacy is the India-Middle East-Europe Economic Corridor, a comprehensive rail and shipping connectivity network announced last year that links the India, Saudi Arabia, the Gulf states, and the EU in a long-term project. Moreover, regional blocs such as the Association of Southeast Asian Nations (ASEAN) expand their partnerships with India, just as Delhi builds defense partnerships with the United States, Japan, and Australia to buttress its strategic autonomy. Through its participation in multilateral fora such as the QUAD or the Indo-Pacific Economic Framework (IPEF), India underlines its commitment to a liberal international order.


Two years ago, India and the EU relaunched trade negotiations to boost economic growth, create job opportunities, and attract significant foreign investment including in pharmaceuticals, machinery, and manufacturing. For now, the two sides continue to differ on so-called technical barriers to trade, with the next round of talks scheduled only after the general election. The European Free Trade Association (EFTA) of Switzerland, Norway, Liechtenstein, and Iceland, in turn, achieved a diplomatic coup of sorts by signing a free trade agreement with India in early March. The deal will see India lift most import tariffs for industrial products from the EFTA countries, as the latter invest $100 billion over the next 15 years.


Still, India will not blindly follow the West, as proven by its recent imports of Russian oil despite being a vocal votary of peace in Ukraine. Its fossil fuel use has stymied climate negotiations, as Delhi refuses to give in on what it considers detrimental to its national interests. That makes it a reliable, but difficult partner for Europe and the US.

India sees strong growth ahead

India already has the highest correlation between overall economic and corporate earnings growth among large emerging markets, making GDP growth projections fairly achievable. Moreover, the next government is expected to continue pushing the “Make in India” agenda launched in 2014. Along with the ‘Skill India’ program, this is one of the many initiatives of the government to improve the skill base of the Indian workforce to support Indian businesses and their global supply chain operations. The program’s success is reflected in the latest arms export figures, which touched a record INR 21,083 crore (ca. US$ 2.63 billion) in FY 2023, a growth of 32.5% over the previous fiscal year at INR 15,920 crore.


In addition, the government committed over $120 billion in FY2023 only to announce to improve transportation infrastructure, including roads and ports, to make the movement of goods and services more efficient. They are also creating an enabling environment for companies to invest in technology and innovation to build their own logistics network or partner with third parties who can provide value-added services like supply chain consulting and inventory management solutions. As part of its revitalization efforts, India aims to bring more manufacturing onshore and increase the number of sectors in which it is a competitive location for supply chains, with a particular focus on energy, pharmaceuticals, and financial services. The FY2024 budget also announced a new funding scheme for research and innovation, whose 50-year interest-free loan offers a significant boost to the private sector's efforts in emerging domains like Gen-AI, new energy businesses, and digital space. According to UNCTAD, India secured the third-highest foreign investments for greenfield projects and the second-largest for international project finance deals in 2022.


Along with Japan and Australia India is one of the founders of the Supply Chain Resilience Initiative (SCRI) after the COVID-19 pandemic revealed an over-reliance on China. The goal of this initiative is to create a "virtuous cycle" of strong, sustainable, balanced, and inclusive growth throughout the Indo-Pacific by sharing best practices, investment promotion, and buyer-seller matching events to diversify supply chains. Prime Minister Modi is using India’s growing appeal as the world’s fastest-growing major economy and alternative to China to clinch free trade pacts even in a departure from the country’s protectionist past.


There are strong macroeconomic growth factors that work in favor of aiding a positive outlook on the Indian economy. Consumption and a pickup in the investment cycle remain key growth drivers. Apart from government spending, capital expenditure is supported by rising capacity utilization levels and strong balance sheets for firms and banks. Such solid fundamentals should more than offset challenges like global slowdown risks, high inflation, and geopolitical tensions.


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