India has overtaken China as the world’s most populous country and is one of the fastest-growing major economies. Here’s what’s driving its rise, the hurdles it faces, and why it matters to Australia.
India is home to more than 1.4 billion people, and in 2023 it overtook China as the world’s most populous country, according to United Nations estimates.
It’s also one of the world’s largest economies and has been one of the fastest-growing major economies in recent years, with growth often above 6% a year. The International Monetary Fund has ranked it among the world’s four or five largest economies.
What’s driving growth
India’s services industry is a major strength. It’s a global hub for information technology and business services, with companies such as Infosys and Tata Consultancy Services employing hundreds of thousands of people serving clients around the world.
It has a young population, with a median age under 30, which means a large and growing workforce for decades to come.
Prime Minister Narendra Modi’s government, in power since 2014, has invested heavily in roads, railways, airports and digital infrastructure. India built a national digital identity system and a cheap, instant payments network that has made digital payments common even among people without bank accounts.
India is also trying to grow its manufacturing industry, offering incentives to attract companies looking to reduce their reliance on China. Apple, for example, now makes a large and growing share of its iPhones in India.
The challenges
India still has deep poverty, and its income per person is far lower than in China or developed countries.
Many workers are in informal jobs or farming, and creating enough good jobs for the millions of young people entering the workforce each year is a major challenge. Regulations, land laws and infrastructure gaps have historically made it harder to do business than in some rival countries.
Air pollution, water shortages and inequality are other major issues.
Why it matters to Australia
India is one of Australia’s largest trading partners and a fast-growing market for coal, gold, lentils, wool and education. Indian students make up one of the biggest groups of international students in Australia, and Indian-born Australians are one of the country’s fastest-growing communities.
In 2022, Australia and India signed the Economic Cooperation and Trade Agreement, which cut tariffs on many goods, and the two countries have been negotiating a broader deal.
The two countries are also partners in the Quad, a security grouping with the U.S. and Japan.
Australian governments see India as a key opportunity to diversify trade away from heavy reliance on China.
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