Global FDI inflows grew from $54bn in 1980 to over $1.5trn in 2019, showcasing the increasing role of multinational corporations in cross-border investments, the report said
The Economic Survey 2024-25, presented by Finance Minister Nirmala Sitharaman today, highlighted that fundamental shifts in the global economic order combined with China's manufacturing prowess and strategic dominance will have a bearing on the growth projections of India.
"Between 1980 and 2008, global GDP rose to $64trn from $11trn and extreme poverty came down to 18% from 44% due to faster growth in China and India. During this period applied tariff rates across the world came down and trade to GDP share went up. However this trend has ended," said Chief Economic Advisor V. Anantha Nageswaran, who authored the report.
"Global trade dynamics have changed significantly in recent years, shifting from globalisation to rising trade protectionism, accompanied by increased uncertainty. This calls for a new strategic trade roadmap for India," the survey noted.
The CEA highlighted that new import restrictions every year imposed by countries have risen to an average of 5026 in the last four years from an average of 3064 between 2009 and 2019. The key reason for such restrictions cited by these countries is strategic competitiveness. The value of trade covered under new import restrictions stood at $1320bn in 2013-24 as compared to $170bn in 2014-15.
"As a result, the share of world foreign direct investment (FDI) net inflows in GDP came down from 5% in the first decade to 1% and the share of world export is also on a declining trend," said the CEA.
Global FDI inflows grew from $54bn in 1980 to over $1.5trn in 2019, showcasing the increasing role of multinational corporations in cross-border investments, the report said.
Addressing the "elephant" and "dragon" in the room Nageshwaran stated China emerged as a manufacturing power as an outcome of the globalisation era. The survey also noted that China is rapidly advancing its market share in critical technologies and over one-third of global production now happens in China.
The report further highlighted that China’s manufacturing dominance is evident in industries including automobiles (especially electric vehicles), mining and refining of critical minerals (Copper, Lithium, Nickel, Cobalt, Graphite), and clean energy equipment. Within a span of a decade China occupied more than 70% of the manufacturing share of the solar value chain.
"Just thirty years later, UNIDO projects that China will account for 45% of all global manufacturing, singlehandedly matching or outmatching the US and its allies. This is a level of manufacturing dominance by a single country seen only twice before in world history—by the UK at the start of the Industrial Revolution and by the US just after World War 2. It means that in an extended war of production, there is no guarantee that the entire world united could defeat China alone," the survey noted.
The report further highlighted that China became a dominant force in the global manufacturing and energy transition by leveraging its competitiveness and economic policy to access and control key resources recognised today as critical for global supply chains.
While geoeconomic fragmentation has contributed to slower global trade growth and stagnation risks, China remained resilient with its manufacturing expansion continuing despite external restrictions.
As India stepping towards becoming a developed nation by 2027, the economic survey emphasises strategic adaptation in an evolving global economic landscape.
"To realise its economic aspirations of becoming Viksit Bharat by the time of the centenary of independence, India needs to achieve a growth rate of around 8% at constant prices, on average, for about a decade or two," the report noted.
"While the desirability of this growth rate is unquestionable, it's important to recognise that the global environment – political and economic – will influence India's growth outcomes," it added.
On the other hand, India “faces limitations in producing critical goods” at the scale and quality required to serve the infrastructure and investment needs of an aspiring economy, the survey said.
For instance, it added that India's solar energy sector faces a significant production gap in key components like polysilicon, ingots, and wafers. While the country's monocrystalline silicon ingot production capacity is projected to grow fivefold from 2 GW in 2023 to 10 GW by 2025, it will still fall short of meeting domestic demand, it said.