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Thesis: Given its population size and rapid economic growth, I expect India will be the next powerhouse nation. This is truly impactful from an economic and innovation standpoint, as much of the newer growth in production capabilities and new inventions will be coming out of India. Countries with partnerships with India will benefit immensely from this relationship.

Welcome to the Insights, Innovation, and Economics blog. If you’re new here, feel free to read my general Introduction to the Blog to understand more about the blog. If you’re returning, thank you, and hope you have a great read!

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India

Let me introduce you to the country of India.

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Continent: Asia

Population: 1.408 billion

Area: 1,269,219 mi2 (3,287,263 km2)

National Currency: the Indian Rupee

GDP: 3.176 trillion USD (263.667 quadrillion rupees)

National Animal: Bengal Tiger

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National Bird: Indian Peacock

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National Flower: Indian Lotus

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National Tree: the Banyan Tree

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National Fruit: Mango

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I mean this is cool and all but where do they stack up in relation to other countries?

Population: 2nd most populous country (after China)

Area: 7th largest country

National Currency: Not sure how to compare this (maybe that 83.02 Indian Rupees = 1 USD)

GDP: 5th largest economy

…and the other facts:

National Animal: I mean a tiger could beat most other country’s animals in a fight so pretty high?

National Bird: Peacocks are pretty cool birds so I think they rank pretty high

National Flower: Top 10 flower for sure

National Tree: It’s a tree (what more do you want from me?)

National Fruit: Mangos are a top tier fruit

Powerful Potential

Okay, that’s great and all, but what’s really going for India? What will make them the next powerhouse nation?

First, let’s take a quick pit stop to briefly discuss some history.

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History

Up until 1947, India was a British colony. Their independence movement had steadily been gaining momentum with the growth of the nationalist Indian National Congress party led by Mahatma Gandhi and Jawaharlal Nehru.

After years of non-violent civil protests, India finally gained independence from Britain onAugust 15th, 1947. Majorly positive, however this movement also was accompanied by a bloody partition with Pakistan.

During the period from 1947 to the 1960s, India consolidated their democracy and adopted a socialist economic model focused on factories, dams, and a state of welfare. Conflicts continued with Pakistan and China during this period.

In the 1960s and 1970s, India experienced famines, causing the adoption and further development of modern agricultural techniques for food sufficiency and security. This quickly promoted population booms as the death rates fell and the birth rates increased.

From the 1990s onwards, India experienced economic liberalization, allowing for free enterprise, free trade, and foreign investment. This promoted an IT revolution and led to the rise of the middle class, transforming their economy.

In the last 20 years, India has steadily risen in geopolitical presence, expanding in global trade, outsourcing, etc, solidifying their global presence.

Population Growth

India currently has over 1.4 billion people and is quickly on pace to become the most populated country in the world.

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To put it in another context, India has been experiencing exponential population growth for the last 100 years, propelling India into the top population spot (hopefully coming next year).

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But, statistics are only powerful in relation to other relevant facts. So, here are some further explanations of how India has experienced positive exponential population growth in the last 100 years.

Here’s China’s age demographic breakdown for its current population (low ages on the bottom, high ages on the top) compared to India’s (great visuals done by Visual Capitalist here).

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As you can see, in the 1990s India and China’s populations looked similar to each other (lower average age - denoted by the black bar), yet China stopped having children. You can see the lower part of the 1991 graph almost perfectly near the average line on the 2025 section. Yet, India throughout this time has continued to have children, producing steady population growth.

This problem is projected to continue through 2050 where China doesn’t have very many kids, yet India continues to reproduce.

But what value comes with having more people?

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Education

In the 1950s, primary school (elementary school) enrollment was 19 million total students. In 2020 there were around 200 million (an average increase of 3.4% every year). To put that into context, about 14% of their population, or 1 in 7 people is a child in elementary school.

The number of primary schools in the 1950s was around 200,000. There were over 840,000 in 2015 (an average increase of 2.2% every year).

It hasn’t just stopped at the primary school level. In 1980, the number of universities in India was 132 and the number of colleges was 4,738. In 2023, there were 479 universities (an average increase of 3.1% every year) and over 43,000 colleges (an average increase of 5.4% every year).

Overall, the educational system in India has vastly improved. But, there’s more!

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Even as so many kids have started going to schools, the number of schools being built and the number of teachers in those schools has steadily gone down over time, signaling better education prospects.

It isn’t just the fact that the educational system has become better over time, it’s also the quality and types of education offered.

Currently, the top college majors in India (producing the most graduates) are the following:

• Business Administration/Commerce
• Engineering
• Computer Science
• Medicine/Nursing

India’s graduates are mainly going into highly technical, highly specialized, critical fields of study.

This, along with the overall development of the educational system in India, has driven strong economic growth.

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Economic Development

Economics gets a little complicated, so I’ll try to make it as simple as possible. In the period from their independence (1947) to the early 1990s, India formed a government-enforced economy meaning the government made most of the economic decisions regarding the production and distribution of products.

Long story short this didn’t work.

So in 1991, India began loosening the restrictions on private industry (increasing the level of liberalization). This led to growth in the country’s private sector.

Fast forward to today. India is considered a mixed economy. The private and public sectors co-exist together to form their entire economy. As it currently stands, people can choose their own jobs and start their own companies, but the government still controls certain areas of the economy (defense, electricity, banking, etc.).

But, this is always understood better in a chart:

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Economic boom. Let’s put it another way. In the last 30+ years, India’s economy has grown around 7.6% each year on average (13x larger than in 1987). In that same period, the United States economy has grown around 5.2% each year (6x larger than in 1987). If these growth rates continued to stay constant, it would take India over 90 years to surpass the United States in GDP.

That’s assuming that India doesn’t continue to grow exponentially.

Let’s break down this GDP number a bit further.

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India’s GDP is directly correlated with the number of people employed (the number of jobs). This makes intuitive sense as in order to produce more GDP (make more money) you have to do one of three things.

1. Lower Costs

By maintaining the same level of jobs and the same level of production, the only way that you could increase the GDP of your country would be to decrease the costs of production. This isn’t super feasible as costs generally increase due to inflation every year, so costs would have to stay the same (year-to-year) or increase less than the inflation rate.

2. Increase Production

An increase in production from existing jobs (no increase in job growth) would account for an increase in GDP. This can, and has been done in the past (fueled the exponential growth of the Industrial Revolution in the United States). The way this becomes accomplished is through innovation and increases in technology. The internet has made the world more productive in the last decade, so much so that many claim we’re experiencing another exponential growth phase.

3. Increase the Number of Jobs

By maintaining the same productivity and costs per person while increasing the number of people working increases the overall GDP of a country. It’s simply scaling the model that’s already been built.

India, in the last couple of decades, has done a mix of the following: dramatically increasing the number of jobs and people employed in the economy and adopting proven technology developed by the west to increase productivity.

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Throughout recent economic expansion, the unemployment rate in India has maintained relatively constant, even slowly decreasing over time. In this time, India’s population has grown around 50% (almost 500 million).

This is an impressive feat, another large driver of GDP growth.

Energy Production

With large population growth and large developments in education, employment, and GDP, there needs to be adequate energy production to facilitate these processes.

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As you can see, to match the exponential population growth and exponential GDP growth, India has grown its energy production capabilities in a similar fashion. Only with energy capabilities do modern societies grow.

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Technological Adaptation

As I’ve touched on already, India has benefited from other countries going before it. This process is called “leapfrogging”. The Center for Strategic and International Studies writes the following:

According to traditional theories of development, the path to prosperity for emerging economies is to follow in the tracks of developed nations. The theory goes that if countries wish to become wealthier, they should simply commit to following the same series of steps that allowed developed economies to prosper. Through modernization, urbanization, and industrialization, this “catch-up” theory of development translates into a sequential process of investment in skills, production capacity, and design technologies that allow developing nations to move through the same stages of development.

Leapfrogging occurs when a nation bypasses traditional stages of development to jump directly to the latest technologies.

A relevant example that happened in India (and many other developing nations) was the development of mobile phones. In many developing countries, the previous available technology, landlines and their infrastructure weren’t totally developed, so with the development of mobile devices, these nations were able to bypass the landline stage and skip directly to mobile technology.

There are many other examples of India leapfrogging technologies.

Payments: India skipped the majority of the phase of paper check use and moved quickly to credit/debt cards and facilitated rapid development of digital payment platforms (on mobile phones).

Financial Infrastructure: Rather than relying solely on traditional brick-and-mortar banks, India adopted digital identity systems that provide access to accounts, payments, credit/insurance for lower-income populations through mobile platforms.

Healthcare Access: India skipped investing heavily in building nationwide hospital networks, instead adopting telemedicine and healthcare apps to bring quality diagnosis and care to remote areas through mobile phones.

Ecommerce: Many rural towns skipped formal retail infrastructure development, instead quickly adopting digital commerce via cell phones.

Will India Be the Next Powerhouse Nation?

All of these factors combined have elevated India’s position as a global leader, and potentially will spur them into being the next powerhouse nation. As a developing lower-middle income nation, India has enormous room for rapid advancement.

Yet, there are some downsides to this rapid growth.

As shown in the energy graph, India has facilitated much of their historic economical growth through fossil fuels. Granted they are starting to be one of the first-movers in the change to renewable energy, but the fact still stands that they generate over 80% of their energy from fossil fuel sources even to this day. That’s not positive for the world as a whole (but as someone in the United States I can’t really talk).

Like many rapidly developing nations, some individuals in key areas of the economy are able to capture a lion’s share of the value as personal wealth. Oxfam International cites that the top 10% in India hold over 77% of the total wealth.

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Actually, this situation is very similar to that which is happening in the United States currently. Especially as a developing nation, having the profits not spread out to all of the various economic agents (everyday workers/people) restricts future growth.

While experiencing large economic growth, India’s critical infrastructure has fallen behind. Though they’ve increased their power production, their overall power infrastructure is inadequate, leading to frequent power cuts, voltage fluctuations, etc. These interruptions disrupt the production process and impact efficiency and productivity.

India’s transportation and logistics infrastructure is inadequate, leading to poor connectivity between production centers and markets. This results in increased transportation costs, longer lead times, and difficulties in accessing raw materials and finished goods.

India’s water supply infrastructure is also inadequate, leading to frequent water shortages, particularly in rural areas. This impacts the production process (especially those heavily dependent on water) and can significantly impact local health.

So, what will have to happen for India to become the next powerhouse nation?

It’s actually really simple.

India needs to continue innovating, adopting new technology, and promoting sustainable growth.

Anywho, that’s all for today.

-Drew Jackson