How Did India’s Economy Affect the World’s Economy?


Globalization is a dominant trend that drives the development of the world’s economy. This phenomenon has resulted in the fact that all nations cooperate to contribute to overall growth. This state of affairs leads to the fact that some countries experience essential improvements that allow them to become more influential players in the world market. India is one of the most suitable examples that show how a nation can develop to have a higher impact on the world’s economy. Thus, the principal purpose of the given essay is to explain why India has experienced significant economic development and how it affected the whole world.

The State of India’s Economy

India is one of the fastest-growing nations throughout the globe. Currently, it is the fourth-largest economy in the world, and it “produced $9.4 trillion in goods and services in 2017” (Amadeo, 2020, para. 1). The country is expected to become the second-largest economy after China in 2050 (Wright, 2017, para. 3). India has a mixed economy that combines characteristic features of traditional and market economies. This diversification is positive because it provides the nation with different sources of growth. There is no doubt that specific factors contribute to the rise of India’s economy, and the following information will comment on them.

Firstly, human capital is a significant resource when it comes to growth and development. With approximately 1.3 billion people, India has a sufficient workforce to increase its manufacturing volumes (Amadeo, 2020, para. 10). Secondly, most sectors of India’s economy are open to foreign direct investment (Kumar, 2014, p. 47). This fact results in the intake of foreign capital in the country, leading to economic development. An active inflow of investment has allowed the country to improve manufacturing that, in turn, has led to higher exports. Table 1 demonstrates that India’s export of goods and services “increased from 6.2 percent in 1980 to 21.5 percent in 2010” (India and the global economy, no date, p. 349).

India’s export of goods and services
Figure 1. India’s export of goods and services.

One should mention that the positive results above have become possible with the help of few contributory factors. They include cheap credit, a favorable exchange rate, and relatively low-cost labor. These phenomena attracted foreign investors, and their resources have been used to improve the Indian economy. There is no doubt that the development process described above has significantly influenced the whole world. Thus, the following section will explain how India has affected the world’s economy.

The Impact of India’ Economy

To begin with, one should note that India’s influence can be regional and global. As for a regional one, it refers to a relationship between the country under consideration and China. The two nations cooperate closely and complement each other because India has raw materials, while China can offer an extensive manufacturing system (Amadeo, 2020, para. 25). Even though this fact means that Chindia, as the two countries are often called, has excellent development potential, it implies an adverse effect on South Asia. It relates to the balance of power that can be violated if Chindia keeps rising, while other countries cannot experience tremendous improvement. Thus, the growth of India’s economy should be a sign for other states in the region to invest in development to preserve their status-quo.

As for a global impact, it manifests itself in a few areas. The most significant of them refers to India’s share in the world’s GDP. It is a positive indicator when a country increases its domestic economic indicators, but it is more important to consider the improvement against the background of the rest of the world. Thus, Table 2 demonstrates that “India’s share in global GDP more than doubled from 2.5 percent in 1980 to 5.5 percent in 2010” (India and the global economy, no date, p. 341). That is why various developed countries, including China, the United States, and others, started cooperating with India. As a result, India’s economy has become more incorporated in the world’s one, and the country has become more influential in the market.

“India’s share in global GDP
Figure 2. “India’s share in global GDP.

Another effect of Indian growth relates to the fact that the country offers suitable conditions for foreign businesses. As a result, the state “has emerged as a hub for outsourcing of IT software and other business services such as business process outsourcing (BPO)” (Kumar, 2014, p. 47). As has already been mentioned, it is because of cheap labor that is available in the country. Consequently, various multinational corporations outsource their activities to India, which is beneficial for the two sides. While businesses have an opportunity to reduce their manufacturing costs, India obtains foreign investment that contributes to its further development.

In addition to that, India has influenced the world in the way that numerous international corporations want to make the country a hub for knowledge-based services (Kumar, 2014, p. 47). As a result, these businesses invested many of their resources in the development of scientific and technological infrastructure in India. At the same time, a high volume of available youthful workforce contributed to the success of the given strategy. As a result, India started exporting communication, computer, financial, and other services to other countries (Kumar, 2014, p. 56). It was a significant event because services had mainly been concentrated in developed economies recently. Table 3 will show that in 2011, “the growth rate of service exports has been higher than that of imports” (Kumar, 2014, p. 55). Consequently, the world’s economy significantly benefits from software products and IT services that are produced in India.

The growth rate of service exports
Figure 3. The growth rate of service exports.

Finally, India has demonstrated a shift that is present in the global economy. It relates to the fact that a transition economy can occupy a significant role in the world and act as a severe competitor for developed nations. While it was caused by globalization and the emergence of IT services, this phenomenon has allowed India to strengthen its economic power. Consequently, the Group of 20 (G-20) should now consider India’s opinion concerning existing issues. For example, the country has refused to follow the United States’ order to stop producing fissile material and keeps increasing its arsenal (Amadeo, 2020, para. 24). It means that India occupies a key position in the world’s economy and politics.


Globalization has resulted in the fact that numerous world countries are mutually connected, and India is a suitable example of how a country can benefit from the given phenomenon. Since the nation has the fastest-growing economy in the world, it could not but affect other countries, and this paper has presented three main areas of influence. Firstly, the development of India in China is a threat to the balance of power in South Asia. Secondly, the nation influences the world’s economy by increasing its share in global GDP. Finally, India provides various countries with services of decent quality, which contributes to overall economic development throughout the globe.

Reference List

  1. Amadeo, K. (2020) India’s economy, its challenges, opportunities, and impact. Web.
  2. India and the global economy. (no date) Web.
  3. Kumar, N. (2014) ‘Reforms and global economic integration of the Indian economy: challenges and future directions’, India & the Global Economy, pp. 46-66.
  4. Wright, A. (2017) 8 things you need to know about India’s economy. Web.

Cite this paper

Select style


BusinessEssay. (2022, November 20). How Did India’s Economy Affect the World’s Economy? Retrieved from


BusinessEssay. (2022, November 20). How Did India’s Economy Affect the World’s Economy?

Work Cited

"How Did India’s Economy Affect the World’s Economy?" BusinessEssay, 20 Nov. 2022,


BusinessEssay. (2022) 'How Did India’s Economy Affect the World’s Economy'. 20 November.


BusinessEssay. 2022. "How Did India’s Economy Affect the World’s Economy?" November 20, 2022.

1. BusinessEssay. "How Did India’s Economy Affect the World’s Economy?" November 20, 2022.


BusinessEssay. "How Did India’s Economy Affect the World’s Economy?" November 20, 2022.