India’s economic growth in recent years has been accompanied by a rise in Hindu nationalism. While the government’s policies have attracted foreign investment and increased the size of India’s middle class, there are concerns that the country’s drift towards right-wing Hinduism could undermine its social fabric and harm its economic prospects.
The economic rise of India has been an important story in recent years. According to the World Bank, India is now the world’s fifth-largest economy, with a nominal GDP of $3.5 trillion. This is a significant increase from the $1.675 trillion GDP in 2010.
India has experienced significant economic growth over the past few decades. Since 1991, India has transitioned from a largely agrarian economy to a service-based economy with a growing focus on manufacturing. In the last decade, India has been one of the fastest-growing major economies in the world, with an average growth rate of 7.6% in 2015-2016, and 6.8% in 2017-2018.
This economic growth has been fueled by several factors, including economic liberalization policies, technological advancements, and increased foreign investment. India’s free market reforms, which were introduced in 1991, opened up its economy to foreign investment, reduced trade barriers, and paved the way for privatization of many state-owned enterprises. As a result, India has become an attractive destination for foreign investment, with inflows increasing steadily over the past few decades.
The country has seen a significant increase in foreign investment in recent years, particularly in the technology and manufacturing sectors. According to the Reserve Bank of India (RBI), India received a total of $81.97 billion in foreign direct investment (FDI) in the financial year 2020-21, up by 10% from the previous year. This shows that despite the pandemic, India remained a preferred destination for foreign investors.
According to the projections by the World Population Review, India, with a population of 1.417 billion people, has surpassed China as the world’s most populous country. India’s large and growing population, which includes an expanding well-educated middle class, has created a large consumer market that continues to attract foreign investment.
Moreover, it has been increasingly recognized as a hub for technology and innovation. The country’s large pool of highly skilled and educated workers has made it an attractive destination for multinational companies seeking to outsource IT and other mainstay services.
Companies, including IBM, Accenture, and Microsoft have already established significant operations in India to leverage these advantages. For example, IBM has more than 100,000 employees in India, while Accenture has over 300,000.
But despite the impressive economic significance and growth, India is facing several challenges that could impede its continued economic rise – the most significant threat is the rise of authoritarianism and right-wing extremism in recent years.
India’s current government, led by the Bhartiya Janata Party (BJP), has been accused of promoting a Hindu nationalist agenda that has led to increased religious polarization and tensions in the country. Under Prime Minister Narendra Modi, there have been several controversial policies that have been seen as authoritarian and discriminatory. For instance, the Citizenship Amendment Act (CAA) passed in 2019 has been criticized for being discriminatory against Muslim minorities, and the government’s clampdown on dissenting voices and restrictions on free speech have been seen as an outright threat to democratic values.
The recent rendition of state-led stifling of public freedoms was the crackdown on students, gathering to watch the BBC documentary, titled India: The Modi Question, delving into the controversy of 2002 Gujrat riots. The paranoid reaction of the state highlights the growing intolerance in India, under the guise of nationalism, against dissent and difference of opinion.
According to the Economist Intelligence Unit’s Democracy Index, India’s democracy score has been declining steadily over the past few years, dropping from a high of 7.92 in 2014 to 6.91 in 2022. This decline has been attributed to factors including the weakening of institutions such as the judiciary and media, the erosion of civil liberties, and the concentration of power in the hands of the ruling party.
Some experts have argued that these policies could harm India’s economic growth prospects in the long term. Arvind Subramanian, a former chief economic adviser to the Indian government, warned that the government’s policies could lead to “a majoritarian state and society,” which would harm India’s economic growth prospects.
Harvard Professor Dani Rodrik also noted that, “the recent surge of Hindu nationalism and intolerance has put at risk India’s economic progress by threatening to undermine its social fabric.” This is because the rise of extremism and intolerance can lead to social and political instability, which can in turn discourage investment and economic growth.
Looking ahead, it is unclear what the future holds for India’s democracy and economy. However, there are some trends and measures that could help safeguard against democratic deterioration and economic decline. One of the most pivotal trends is the continued rise of the middle class.
According to the World Bank, the size of India’s middle class has more than tripled since 2004, and it is projected to continue to grow in the coming years. This growing middle class is likely to be a key driver of India’s economic growth, as middle-class households have more disposable income to spend on goods and services. Thus, a growing middle class would continue to steer demand for a wide range of products, from consumer electronics to automobiles to luxury goods, which in turn would sustain economic growth and job creation in India.
Another potential trend is the rise of digital technologies and e-commerce, which could help to drive economic growth in India. According to a joint-report by the Federation of Indian Chambers of Commerce & Industry (FICCI) and Anarock, India’s e-commerce market is expected to grow from $38 billion in 2021 to $120 billion by 2026. This could provide new opportunities for entrepreneurs and small businesses, as well as create jobs and spur economic growth.
The adoption of digital payments in India has also increased significantly in recent years, with the government’s Demonetization drive in 2016 acting as a catalyst. And according to data from RBI, on average, the value of digital transactions in India reached around $3 trillion in 2022. And non-cash transactions are touted to constitute nearly 65% of all payments in India by 2026. Such developments would continue to reduce bureaucratic hurdles and streamline procedures, improving the ease of doing business in India.
However, the rise of authoritarianism and rightist extremism could also continue to shape the future of Indian democracy and subsequently hamper the economy. If left unchecked, these forces could lead to increased political instability, social unrest, and economic decline.
The mainstay area of concern is the impact on foreign direct investment (FDI). According to data from the RBI, FDI inflows to India in the financial year 2021 were $81.72 billion, down by 1.6% from the previous year. Some experts have suggested that the government’s focus on Hindu nationalism and religious issues is partly to blame as rightist policies notoriously deter foreign investors, particularly those who are wary of investing in countries with a high degree of political instability.
To prevent or minimize the negative impact of political instability on the Indian economy, it is important for the government to prioritize economic policies and address the concerns of different stakeholders. This includes ensuring transparency and accountability in decision-making, promoting investor confidence, and pursuing policies that support economic growth and job creation. It is also crucial to protect democratic values, including freedom of speech, freedom of the press, and protection of minorities. Ultimately, a combination of political and economic prudence and equity could ensure India’s trend to greatness. Otherwise, it is all but a gamble of precedence – between authoritarian decline and economic prosperity.
[Photo by Hari Mangayil, via Wikimedia Commons]
The views expressed in this article are those of the author and do not necessarily reflect TGP’s editorial stance.
Syed Zain Abbas Rizvi is a political and economic analyst. He focuses on geopolitical policymaking and international affairs. Rizvi has written extensively on foreign policy, historical crises and economic decision making of Europe and the US.
