In 2024, the United States and the European Union collectively contributed 39% to the global GDP (measured in 2015 dollars). China followed with a 19% share, while India accounted for 3.5%. Combined, these four economic giants represented 62% of the world's GDP. Remarkably, over the next 36 years, by 2060, the global economic landscape is projected to undergo a dramatic transformation. This shift will occur within the lifetime of today's school graduates, potentially altering the balance of economic power worldwide.
Assuming the world continues its average annual growth of 3% in real terms, similar to the trend since 1960, by 2060, China’s aging population could see its share of global GDP rise to 22%, just behind the US. Boosted by immigration, the US economy is projected to grow at a steady 3% annually, reaching a 23% share of global GDP. India, with its robust growth rate of 6.5%, could capture 10% of global GDP, closely trailing the EU, which is expected to grow at a modest 2% per year, achieving an 11% share. Combined, these four economies could account for 67% of global GDP in 2060, an increase from 62% in 2024. This projection aligns with the ongoing trend of economic power concentration among these four economies, whose combined share in global GDP has risen from 57% in 1989 to an anticipated 67% in 2060.
If economies operated as rational and inherently collaborative entities rather than competitive ones, these four powerhouses would pool their resources to boost growth among themselves. However, political economy factors complicate this ideal scenario. Leaders often vie for global dominance, cater to domestic political agendas, and posture to appear more influential in global affairs than any one person can realistically be. This results in volatile geopolitics, with flashpoints like the Russo-Ukraine conflict and the Israeli-Gaza wars, driven mainly by the stubbornness of the respective leaderships.
Unfortunately, among the four economies discussed, India is the most vulnerable to geopolitical risks for two key reasons. Firstly, historically, India has not invested enough in strengthening its support base within its immediate neighborhood. While India has made significant conciliatory gestures, such as backing China’s entry into the UN Security Council in 1949 and supporting the People's Republic's replacement of Taiwan as a UN member in October 1971, these efforts have not been sufficient to mitigate geopolitical sensitivities.
With the United States firmly supporting China's inclusion, India had limited options. However, the question remains: why didn’t India leverage this favor to its advantage by negotiating a resolution to our border disputes in exchange for backing China’s institutional privileges in the United Nations?
Secondly, rather than focusing on creating a unified regional strategy for global alliances, India chose to pursue global leadership of the developing world, as evidenced by its stance at the Bandung Conference in 1955.
Prioritizing global media attention over discreetly resolving bilateral or regional issues has been a significant weakness for India, one that continues to this day. India’s decision to stay out of the two major Asian trade agreements, RCEP and CPTPP, highlights a misconception that India is large enough to manipulate outcomes to its benefit from the outside. This stance also ignores the reality that India lacks the institutional capacity to influence decisions effectively from within such plurilateral agreements.
Despite facing the challenges of a cumbersome bureaucracy and the distraction of politically motivated social fragmentation, India has achieved the highest growth rates in the post-Covid era. This resilience creates new opportunities for deeper integration into global and regional partnerships. By maintaining our current key asset—high economic growth—we can better seize these opportunities and improve our standing in the global economy.
Is India's policy framework adequately focused on fostering high growth, the essential element for global recognition? The answer is a cautious yes. India has shown both skill and bravery in using fiscal expansion to navigate the economic turmoil caused by the 2008 global financial crisis, policy missteps like the 2016 demonetization, and the 2021 Covid-19 pandemic, all while effectively safeguarding tax revenue. However, efforts to carry out deep reforms are still hampered by concerns over the potential negative political repercussions from vested interests that stand to lose out.
The middle class benefits from low property taxes compared to land values, subsidized or free electricity and water, free bus rides for women, and inexpensive rail travel. Large private corporations enjoy import protection and access to influential government forums. Many entities in the extensive public sector, including banks, manufacturing, and utilities, operate as unviable enterprises, akin to zombies. Government employees with low productivity receive inflation-indexed salaries, automatic promotions, tax-free perks, and housing. Wealthy farmers benefit from free electricity, irrigation water, and cheap fertilizers, while paying no income tax. They often use the plight of small and marginal farmers, who make up 80% of the farming community with average land holdings between 1.4 and 0.4 hectares, to justify these advantages.
Although there are numerous structural reforms pending to address low productivity, it is feasible to achieve a real annual growth rate of around 6.5% by making incremental improvements—such as increasing efficiency in fiscal spending and boosting revenues through more effective tax assessments and strategic levies. However, this rate will not be enough to drive growth to 8% annually over the next 36 years until 2060. The question is, why is reaching this higher growth rate so crucial?
To effectively compete in Asia's challenging environment, where China presents both an economic and security threat, India must build substantial fiscal resources, infrastructure, and skills. The situation in Taiwan serves as an early warning. GDP serves as a useful indicator of economic strength, political influence, and military capability. With China's GDP at $18 trillion (2015 dollars)—about six times larger than India's $3.4 trillion (2024)—closing the gap requires India to sustain a growth rate that exceeds China's by four percentage points annually (in real terms). Currently, following the Covid-19 downturn, India enjoys a growth differential of approximately two percentage points in its favor. Achieving near parity in GDP is possible but relies on optimistic assumptions: that China's growth remains sluggish at around 4%, tapering to 3.5% per year, and that India achieves a robust growth rate of 7-8% annually over the next 36 years until 2060.
It is entirely possible for democratic India, with its vast young population and strategic location in rapidly growing Asia, to seize the opportunity from a stumbling China and lead future global GDP growth. China's choice of a confrontational and poorly timed approach to asserting global dominance has inadvertently created a chance for India to emerge as a more dependable major economy. India could offer the world a market with rapidly increasing purchasing power, globally compliant institutional standards, and competitive suppliers. If India fails to capitalize on this opportunity, the responsibility will rest squarely on its own shoulders.
(the writer can be reached at dipakkurmiglpltd@gmail.com)