In News:

India, currently classified as a lower-middle-income economy with a Gross National Income (GNI) per capita of USD 2,540 (2023), aspires to achieve high-income status by 2047, coinciding with the centenary of its independence. A recent World Bank report titled “Becoming a High-Income Economy in a Generation” outlines the necessary reforms, challenges, and growth scenarios India must navigate to meet this ambitious target.

Growth Imperatives and Economic Targets

To transition into a high-income economy, India must sustain an average real GDP growth rate of 7.8% annually until 2047, raising its GNI per capita nearly eightfold. Historically, India grew at 6.3% (2000–2024) and has become the world’s fifth-largest economy, doubling its global share to 3.4%. However, "business-as-usual" growth (6.6%) will fall short, and only accelerated reforms can enable a successful transition—something achieved by few countries like Chile and Poland.

Key Policy Areas for Reform

• Boosting Investment and Capital Formation:
  • Increase total investment from 33.5% to 40% of GDP by 2035 through public-private synergy.
  • Address infrastructure deficits, streamline land acquisition, and liberalize FDI norms.
  • Improve financial markets to support long-term infrastructure and SME financing.
• Enhancing Labor Force Participation:
  • Raise overall labor force participation from 56.4% to 65%.
  • Increase female workforce participation from 35.6% to 50% by addressing socio-economic barriers and improving childcare and safety infrastructure.
  • Target job-rich sectors like manufacturing, logistics, hospitality, and care economy to generate employment.
• Structural Transformation and Trade Integration:
  • Shift labor from agriculture (currently employing 45% of workforce) towards manufacturing and services.
  • Boost India's Global Value Chain (GVC) participation by reducing high tariffs and non-tariff barriers, particularly on intermediate and capital goods.
  • Simplify customs, improve regulatory clarity, and promote technological adoption across sectors.
• Promoting Balanced Regional Growth:
  • Support low-income states in developing healthcare, education, and infrastructure.
  • Deepen industrial reforms and trade competitiveness in developed states through federal programs like the Urban Challenge Fund.
• Strengthening Human Capital and Innovation:
  • Expand vocational training and R&D investments in emerging areas such as AI, biotechnology, and clean energy.
  • Encourage entrepreneurship and formalization to reduce the high informal employment rate (73%).

Challenges on the Path

India faces slowing investment rates (down from 35.8% in 2008 to 27.5% in 2024), low FDI inflows (just 1.6% of GDP), and declining trade openness (exports and imports fell from 56% of GDP in 2012 to 46% in 2023). Regulatory unpredictability and complex business processes hinder private investment.

Conclusion

India’s vision to become a high-income economy by 2047 is ambitious yet attainable, contingent on sustained growth, robust reforms, and inclusive development. Strategic policy execution in trade, labor, investment, and federal cooperation will be critical to transforming India's economic trajectory and positioning it as a global leader by its centenary year.

In News:

India's foreign policy has undergone a strategic shift towards West Asia, driven by imperatives of energy security, economic integration, and geopolitical balance.

The launch of theIndia-Middle East-Europe Economic Corridor (IMEC)at the G20 Summit 2023 marks a key initiative aimed at reshaping global trade while deepening India’s engagement with the Middle East and Europe.

Importance of the Middle East for India

• Energy Security:The Middle East supplies over 53% of India’s crude oil (as of January 2025). Long-term energy agreements, such as the LNG deal with Qatar (until 2048) and India-UAE green hydrogen MoUs, ensure stable energy flows. Strategic ties mitigate disruptions due to OPEC+ cuts and geopolitical tensions.
• Trade and Economic Ties: India’s trade with the Gulf Cooperation Council (GCC) reached USD 161.59 billion in FY 2023–24. The UAE is India’s third-largest trading partner, with exports worth USD 35.6 billion. A proposed India-GCC Free Trade Agreement and operationalization of IMEC can enhance regional integration.
• Diaspora and Remittances:Over 66% of India’s 1.34 crore NRIs live in Gulf nations. India was the world’s top remittance recipient in 2022, with USD 111 billion, a major share from the Middle East. Labor reforms in the region (e.g., Saudi Arabia’s Nitaqat) influence migrant welfare.
• Geopolitical and Strategic Autonomy: India balances relations across regional fault lines — Iran-Saudi and Israel-Arab states — while maintaining strategic autonomy. Defense cooperation includes naval exercises (e.g., Al-Mohed Al-Hindi with Saudi Arabia) and connectivity via Chabahar Port in Iran.
• Food and Maritime Security: The Gulf is a major destination for Indian agricultural exports (e.g., UAE imports worth USD 1.9 billion in FY 2022–23). Strategic waterways like the Red Sea and Arabian Sea are crucial for trade, though increasingly vulnerable to piracy and regional conflict.

IMEC: A Strategic Connectivity Corridor

• IMECenvisions linking India to Europe through the Middle East via multimodal transport and digital-energy corridors, bypassing the Suez Canal. It aims to counter China’s Belt and Road Initiative (BRI).
• Key stakeholders include India, UAE, Saudi Arabia, Jordan, Israel, and the EU. The Intergovernmental Framework Agreement (2024) lays the foundation for implementation, targeting USD 600 billion in infrastructure investment by 2027.
• Objectives include trade facilitation, supply chain diversification, digital connectivity, and green energy collaboration. However, the Israel-Gaza conflict and regional instability have delayed execution.

Challenges

• Energy volatility due to OPEC+ decisions and Red Sea disruptions.
• Geopolitical unrest in Yemen, Gaza, and Iran-Israel tensions.
• Maritime insecurity, with piracy and Houthi attacks raising shipping costs.
• Labor rights issues, including migrant exploitation.
• Strategic competition from China, with over USD 273 billion invested in the region since 2005.

Policy Recommendations

• Co-develop energy infrastructure (e.g., Saudi Aramco’s stake in Indian refineries).
• Diversify trade via an India-GCC FTA and sectoral cooperation (IT, defense, fintech).
• Enhance maritime and digital connectivity through IMEC and joint port development.
• Secure labor migration with skill pacts and expanded protection schemes.
• Strengthen counter-terrorism and defense cooperation, including intelligence sharing.

Conclusion

India’s West Asia strategy is multifaceted—balancing energy diplomacy, trade, diaspora ties, and strategic connectivity. IMEC offers a transformative opportunity to position India as a central link in global supply chains, but its success depends on stable regional geopolitics and coordinated implementation.