India’s Economic Growth: Lessons for Pakistan

India's economic rise, driven by tech, FDI, and green energy, offers valuable lessons for Pakistan’s future.

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Over the past decade, India, under Prime Minister Narendra Modi, has emerged as one of the fastest-growing major economies, albeit with concerns over religious minorities' persecution remaining a contentious issue.

Its banking sector remains robust, and the government's finances have stayed resilient despite the challenges of a global pandemic.

Its economy has been outpacing other major economies, with a growth rate of 6.7% year-on-year in the April-June quarter of 2024, surpassing China's 4.7% growth during the same period (Reuters). Last year, India surpassed the UK to become the world's fifth-largest economy, and analysts at Morgan Stanley predict it will overtake Japan and Germany to claim the third spot by 2027 (BBC).

This remarkable ascent is fuelled by liberalization (1990s), technological innovation, and strategic reforms. However, concerns remain about the sustainability of this growth and its equitable distribution. The World Inequality Lab reports that in 2022-23, the top 1% of Indians received nearly 23% of the nation's annual income and held an alarming 40% of its wealth, underscoring the growing inequality. Examining India’s economic trajectory and its challenges offers valuable lessons for Pakistan as it seeks to overcome its own economic hurdles and chart a path toward inclusive and sustainable growth.

India's trajectory toward becoming a dominant economic power is underscored by the significant investments from major Indian conglomerates such as the Adani Group, Reliance Industries, and Tata Group. These investments not only reflect the robust confidence of domestic investors in the country’s governance and economic potential but also inspire trust among foreign investors. This dynamic has contributed to India attracting an impressive $70.97 billion in FDI during 2022-2023, further solidifying its position as a global investment hub (White & Case).

The Adani Group is spearheading India’s renewable energy ambitions with a $70 billion investment plan by 2030, aiming to establish the country as a global hub for green energy while simultaneously enhancing trade and integration through expanded ports and logistics infrastructure (Economic Times). Complementing this effort, Reliance Industries has committed over $75 billion to renewable energy initiatives, including solar power and hydrogen projects, further cementing India’s transition to sustainable energy (Economic Times). Adding to this momentum, the Tata Group is channelling $90 billion over five years into electric vehicles, clean energy, and advanced technology sectors (Business Standard). Notably, Tata Consultancy Services (TCS), a global IT leader, generates over $25 billion annually, reflecting India’s growing prominence in the global technology landscape (Startup Talky).

Building on this technological prominence, India’s broader technology sector has experienced remarkable growth, driven by a strong emphasis on STEM education and a thriving start-up ecosystem. India’s $250 billion tech sector plays an important role in the economy, employing about 5.4 million people. Tech services make up about 7.5% of the country’s $3 trillion plus GDP (Economic Times). Companies like TCS, Infosys, and Wipro contribute immensely annually to the economy, while the country’s 100+ unicorn start-ups boast a combined valuation exceeding $350 billion, underscoring India’s technological prowess and innovation (Economic Times).

One of the most remarkable transformations in India has been in its digital infrastructure. With 881 million internet subscribers, India now boasts the second-largest internet-enabled population in the world, trailing only China (Times of India). Building on this widespread access, India has developed a robust digital public infrastructure, allowing citizens to easily access essential services and documents, such as tax records. This advancement has made public services and credit more accessible to a broader segment of the population. Notably, India now leads the world in digital payments, with the volume of digital transactions exceeding the combined total of the next four leading countries.

Looking ahead, India’s working-age population (15-64) is projected to reach 1.04 billion by 2030, offering significant potential for economic growth (Ernst & Young India). However, challenges remain in building an efficient and skilled labour force to fully harness this demographic advantage. Additionally, the country is adding 10,000 km of highways annually, significantly improving its infrastructure. India also ranks among the world’s largest remittance receivers, with remittances totalling $129 billion this year, further reflecting the country’s growing economic significance on the global stage.

Pakistan, too, can aspire to leverage its own strengths by learning from India’s experience and addressing its challenges. Bold decisions are required to create an environment that attracts both domestic and foreign investment, with a strong emphasis on improving the ease of doing business. Strengthening domestic investor confidence will ultimately lead to increased foreign direct investment (FDI). Additionally, Pakistan must revamp its strategy to counter terrorism, which continues to hinder the investment climate and pushes businesses to seek more stable alternatives. Overhauling the judicial system is also essential, ensuring that justice is delivered on merit within the shortest possible time frame, in line with international standards. Finally, technology must be embraced as a transformative tool. By integrating it into governance and empowering the growing number of young freelancers, Pakistan can harness its full potential, fostering innovation and economic growth.

The writer author is currently serving as an Assistant Research Associate at IPRI