How strong is India's economy?

I amn six weeksConsolidating his status as India's most important leader since Nehru, Narendra Modi is expected to win a third term as India's Prime Minister. The electoral success of this tea seller's son reflects his political prowess, the vigor of his Hindu-nationalist ideology and the erosion of democratic institutions. But it reflects a feeling among ordinary voters and elites that he is bringing prosperity and power to India.

Mr Modi's India is an experiment in how to get rich amid globalization and under strong leadership. Whether it can grow rapidly and avoid unrest in the next 10-20 years will shape the fate of 1.4 billion people and the global economy. As our special report illustrates, Mr Modi's formula works up to a point. But there are questions whether India's success will last and whether it will depend on his tenure.

India, the fastest growing large country in the world, is expanding at a rate of 6-7% per annum. New data shows private sector confidence at highest level since 2010. Already the fifth largest economy, it could become the third largest by 2027, behind the US and China. India's influence is manifesting itself in new ways. US companies have 1.5 million employees in India, more than any other foreign country. Its stock market is the fourth most valuable in the world, while the airline market is the third most valuable. Russia's oil purchases change global prices. Rising wealth means greater geopolitical ascendancy. After the Houthis disrupted the Suez Canal, India deployed ten warships to the Middle East. Presidents Joe Biden and Donald Trump have embraced it without denying that he will be an independent actor.

If you're looking for the „next China” — a manufacturing-led wonder — it's not India. The country is growing at a time when commodity trade and industrial automation are stagnating. It should therefore pioneer a new model for development. One pillar of this is familiar: a massive infrastructure project that ties together a vast single market. India has 149 airports, double the number a decade ago, and adds 10,000 km of roads and 15gw Solar energy capacity per year. Some of these infrastructures are intangible, including digital payments, modern capital markets and banks, and an integrated digital tax system. All of this allows companies to exploit national economies of scale.

The second, more innovative pillar is services exports, which have reached 10% GDP. Global trade in services is still growing and Indian It is Companies have marketed „global competence centers” – centers that sell to multinational companies R&D and services such as law and accounting. Yet despite its sophisticated technological complexes, India is still a semi-rural society. It is the final pillar of the economic model, a new type of welfare system in which millions of poor Indians receive digital transfer-money. The share of people living on less than $2.15 a day in 2017 prices, a global measure of poverty, has fallen to below 5% from 12% in 2011, according to new data.

How much is Mr. Modi worth? His most successful policies are based on the liberal agenda that emerged in India in the 1990s and 2000s, but there is nothing wrong with that. He deserves credit for forcing deadlocked reforms, personally overseeing key decisions, and overturning laggards and opponents in the bureaucracy. Some say he developed crony capitalism. Although some of the larger companies still benefit, the focus on business is reduced, corruption is reduced and business has a richer diversity. A cross between Chief Executive Officer And a populist, Mr Modi enjoys PowerPoint presentations as much as rallies. If we win another five years, India will continue to grow stronger. So does its middle class: 60 million people earn more than $10,000 a year; By 2027, 100m, Goldman Sachs reckons, will now have 20% of its employees in India.

Yet India faces a dire problem. Of the 1 billion people of working age, only 100 million or so have formal jobs. Most of the rest are stuck in casual work or unemployment. Mr Modi's humble beginnings enable him to speak to these people. He uses government-run stimulus programs to encourage manufacturing to absorb some of India's spare labor. But even if the plan reaches its target, it will create just 7 million jobs. President Xi Jinping's plan for a Chinese export boom will make the task harder.

India's economy needs to generate massive employment to sustain its growth. A path can be even bigger It is The sector acts as a hub for a digitizing world and is a cluster of export industries including digital finance, food and defense (helped by strong ties with the US). As workers spend in these industries, more jobs will be created in other sectors, from construction to hotels. An efficient, single internal market would raise overall productivity and well-targeted welfare would help the disadvantaged. For this, India will need to transform education and agriculture, and enable mass migration from the densely populated north to large southern and western cities.

By those epic standards, Mr Modi has very little to say. His Bharatiya Janata Party (b J P) has some talent and ideas, but mostly focuses on ideology and Muslim-bashing. Increasing liberalism has reduced political opposition and freedom of speech. Firms' fear of Mr Modi may explain why investment has yet to pick up. The process of preparing the public for the massive social change of the 2030s has barely begun. Restructuring education, cities and agriculture will require the cooperation of state governments b J P and social groups facing disruption, but Mr Modi's vindictive politics have alienated many of them.

India's Lee Kuan Yew or its Erdogan?

The question for India and its heavyweight economy is not whether Mr Modi will win, but whether he will grow. At 73, his executive powers may fade. He needs to tone down his authoritarian impulses to create a new reform agenda parallel to the one that emerged in the 1990s, and to foster a thriving knowledge economy that rewards people for thinking for themselves. His party needs to curb its chauvinistic politics to attract more domestic and foreign investment and find a growth-minded successor. If not, Modi's national renewal mission will not live up to its promise. ■

Subscribers only: Sign up for our weekly Cover Story newsletter to see how we design each week's cover.