Could India Be the World’s Next Superpower?

“The Splendour That is India”, Courtesy of Associated Printers, Madras.

In 2008, India passed Japan to become the world’s third-largest economy in terms of Purchasing-Power adjusted Gross Domestic Product. Though impressive, the consistency with which India has continued to grow is perhaps even more fascinating. According to recent IMF (International Monetary Fund) estimates, India contributed more to global GDP growth than any other country in 2025. However, India’s economy remains byzantine. Property rights are tenuous at best, and international trade is increasingly bogged down, not only by overregulation but tariffs as well. While India, under Narendra Modi’s leadership, has shown itself willing to reform domestically and open to deregulating international trade, much more needs to be done. Indeed, until India’s vast underground economy feels unencumbered enough by regulation to go legal, the scope of India’s true GDP growth remains unknowable. By shrugging off the shackles of an overbearing state apparatus, China emerged as the world’s factory. Assuming India can beat back barriers to trade abroad and at home, it is poised to do the same.

Key to India’s growth is free trade with the United States and other global partners. Although President Trump initially imposed an effective tariff rate of 50% on Indian goods sold to the United States, the two countries have since made amends: in exchange for hazy commitments to invest in the US and a pledge to stop buying Russian oil, India is set to receive preferential treatment on steel, automotive, and pharmaceutical imports, as well as discounted tariff rates on all other imports. There’s no clear timeframe on how India is going to invest in the US, and aside from China, India remains the largest importer of Russian crude to date. Furthermore, as Trump’s legal footing for tariffs has collapsed due to the Supreme Court’s ruling on the 20th, the odds of further instigation by President Trump have shrunk. Although exports to the U.S. dropped slightly after the imposition of tariffs, numbers from the Indian Ministry of Commerce indicate that India’s overall trade surplus jumped by over 30% from December 2025 to January 2026. As trade between the US and India increased by an eye-watering 18.9% overall between 2024 and 2025, Indian exports to the US are unlikely to disappear anytime soon. By dominating exports to the U.S. while buying Russian oil on the cheap, India has kingmaker leverage in any future negotiations with the Americans.

In addition to a favorable deal with the Americans, India has struck what European Commission President Ursula Von Der Leyen described as “the mother of all deals” with the European Union. As a result of the deal, India and the EU are set to remove around half of all tariffs on each other over the next year, and almost all the rest over the next 5-7 years. Additionally, Indian students will be given preferential treatment when seeking to study in the EU – a crucial development for a country with around 250 million students. With $14.45 trillion in aggregate household consumption in 2024 and a population of over 400 million, the market for exports to the EU is vast. Additionally, as consumers tend to increase consumption with age and over a fifth of Europeans are aged 65 or older, India is set to profit from an expansive consumer market even as the population of the EU collapses. When compared to the aggressive tariffs the EU has levied against China and brutal penalties imposed on American companies, India appears to have received the green light from Brussels.

As barriers to trade with other nations are torn down, India still has work to do on making domestic commerce easier. Although the country has privatized around a third of its public sector since 1991, the country still struggles to cast off centuries of colonial overreach compounded by Soviet-inspired centralization. According to World Bank estimates, it still takes 1,445 days – approximately 4 years – for the average contract to be settled after a dispute; the whole process erodes around a third of the value of any contract. Such a punishing system for even the most basic of legal functions creates an environment where underground investments are incentivized and growth is stymied. Indeed, it is estimated that over a quarter of India’s economy is entirely underground – neither taxed nor monitored by any government entity. Were this underground industry to come out of the shadows, India’s GDP would grow by around $900 billion overnight, not to mention the incidental growth created by increased transparency and risk mitigation. While there may be other ways to sustain growth, deregulation seems to be the clearest path forward for India as it expands.

To keep pushing forward, Prime Minister Modi must keep his house in order. Citing concerns about new U.S. and E.U competition, farmers’ unions in Punjab and Haryana already went on strike on February 12, 2026, with plans for more to come. As union leader Rakesh Tikait asserted in Delhi last week, “The EU and the U.S. provide massive subsidies to their farmers and possess huge agricultural surpluses, which they have consistently attempted to dump in countries like India”. With over 300 million workers expected to participate, such agitation is likely to significantly damage support for international trade. Union success wouldn’t be unprecedented: in 2020, after a bill removing some price floors on agricultural goods was passed through the Indian parliament, millions of farmers drove tractors into the capital of Delhi and protested against the bill until it was eventually repealed by the Indian Supreme Court. 

Assuming politicians are able to figure out their differences, India’s population is certainly able to bear the shocks of privatization. Although many struggle to find a job after college, India’s large working-age population means it need not worry as much about the costly pensions that have hobbled many Western countries. Also, as China’s population has aged, the cost of labor has increased beyond what made it initially attractive to foreigners looking to outsource. Just as China replaced Japan as the world’s manufacturing hub decades ago, India now seems set to step in and replace China as a repository for labor. Although India’s population growth is decreasing and is likely to continue slowing, over 70% of the country is currently of working age, meaning population trends could still reverse if families decide to have more children now. Despite worries about future aging, India’s current level of human capital will surely contribute to exploding output over the next decade. 

While India’s future hinges on deregulation and maintaining alliances, it does seem far rosier than anyone else’s at the moment. Through careful neutrality with warring powers and a robust workforce, India is a nascent superpower, on the precipice of the same miraculous growth China experienced in the 2000s. Under a self-described socialist regime, India was the black sheep of Asia, derisively mocked by economists for “Hindu rates of growth”, almost half that of other fast-growing Asian Tigers. Now, as India drives growth in Asia and around the world, the dichotomy has flipped, and the so-called Hindu rate of growth may be something others want to emulate.