SRIPERUMBUDUR, India — Twenty-five miles from the bustling Southern Indian city of Chennai in India’s Tamil Nadu sits Sriperumbudur. Historically regarded as the birthplace of Hindu saint and philosopher Ramanuja, the town — in more recent years — has become just as eponymous as one of India’s most prized special economic zones, generating billions annually for the country’s burgeoning economy. 

Rows of small motorcycles line the dusty lots in front of large steel gates, where people with backpacks stream in and out of muted gray complexes housing global conglomerates from Ford, Nissan and Mitsubishi to Dell, Motorola, Saint-Gobain, Samsung and the Apple-producing corporation, Foxconn, of which India now produces over 7 percent of the iPhone’s global output. 

So, what makes India the world’s fastest-growing major economy, attracting so many big names?

“(Prime Minister) Modi has continued with the liberalization policies of the preceding Congress government to a large extent. He has strengthened relationship with the United States and been part of anti-China groupings at the global level which has ensured the greater flow of investment capital into India and brought buoyance to the Indian economy,” Fellow at the Manohar Parrikar Institute for Defense Studies and Analyses, Ashok Behuria, tells The New York Sun. “Moreover, India is enjoying the attention it is getting from the US and its allies as a partner in their efforts to checkmate China, which is asserting its presence around the world as a global power of consequence.”

A Manufacturing Hub on Wall Street’s Radar 

Since taking office in 2014, Mr. Modi has sought to transform the country’s economy, which at that point was the tenth largest in the world, into a global, innovative manufacturing nexus with the initiative “Make in India” — attracting foreign giants from a multitude of industries, including tech, textiles, vehicle manufacturing, green energy, pharmaceuticals, electronics and medical devices — away from China. 

In less than a decade, India has bypassed the United Kingdom to emerge as the world’s fifth-largest economy, expanding 8.2 percent over the last fiscal year. By 2030, India’s economy is projected to surpass Japan and Germany to become the third largest in the world—behind the United States and China.

India’s reform and growth have Wall Street powerhouses such as Morgan Stanley and Goldman Sachs Inc., which two decades ago pinned China as the global growth hub to watch, now championing India as the optimal investment destination—and counterbalance to Beijing’s floundering economy. The post-pandemic economic recovery has propelled India’s stock market valuation to approximately $5 trillion, placing it on par with Hong Kong’s, making India impossible for Wall Street to disregard. 

Minister for Industries, Investment Promotions and Commerce in the Government of Tamil Nadu, TRB Rajaa, told the Sun that the “manufacturing sector is the key to completely unlock India’s economic prowess, especially as the country seeks to position itself as a global industrial powerhouse.”

“Tamil Nadu has been at the forefront of balancing regulatory oversight and labor welfare with market liberalization to foster sustainable economic growth,” he noted. “We recognize that while regulations are essential for maintaining standards, safeguarding the environment, and protecting workers’ rights, creating a conducive environment for private sector growth is equally important.” 

The Modi Approach 

Since 2014, the Modi government has focused on stabilizing India’s macroeconomic policies to build resilience against external shocks, particularly following the 2008 Global Financial Crisis. Efforts included reducing inflation, addressing jobless growth, enforcing fiscal discipline, and increasing foreign exchange reserves. The government has adhered to fiscal prudence through the Fiscal Responsibility and Budget Management (FRBM) Act, aiming to maintain a fiscal deficit below three percent. 

The former Deputy National Security Adviser of India, Pankaj Saran, told the Sun that the first five years of Modi’s tenure entailed “cleaning up” past mistakes and integrating financial sector and tax reforms — including corporate tax rate reduction, goods and services tax, and digitalization of tax filing — which took some time to take hold. 

“Today, you can see the benefits. Tax revenues have jumped up, and foreign exchange reserves and exports are at an all-time high,” Mr. Saran continued. “But the biggest corrections within the country are that (these reforms) are internally driven, not externally driven – unleashing entrepreneurship, making production more easily available, and so many laws have been taken off the books because they were old or redundant.”

It is all a far cry from the once statist economy, which gradually transitioned to a more market-oriented one beginning in the 1980s and gaining significant momentum in the 1990s, focused on deregulation, privatization and liberalization.

“It (the statist economy) was a control system, and the competition was not there. Today, an Indian company has to think about Starbucks on the opposite side, and it has to work. There are options. The consumer middle class wants choices; they want options, and the state-controlled ecosystem would never have been able to provide that,” explained the Executive Director of Indian dairy conglomerate ABT Industries Ltd, Shankar Vanavarayar. “Our advantage is the multiplicity of offerings that have come. Competition has come, quality has enhanced, and services become better. All these are very important things in a global order.”

A vital part of the economy-boosting puzzle has entailed pouring trillions of rupees into India’s physical infrastructure, such as improving ports, roads and railways. 

“What the current government has gotten right is that they spent on infrastructure. India has always had woefully poor infrastructure in the past, but they’ve invested significantly in infrastructure,” Managing Director of leading Indian automotive component manufacturer Wheels India Ltd, Srivats Ram, told the Sun. “(This) has been a multiplier in terms of GDP, and this is what has taken us to where we are now. We are very much part of the global supply chain and the global economy.”

The approach also focused on digital infrastructure, forging a spectrum of public digital platforms such as the Unified Payments Interface (UPI), enabling smartphone transactions with none or nominal fees, 24/7 access and widespread ease of use, transforming businesses to bolster economic growth. 

Mr. Vanaavarayar also credited the uptick in science, technology, engineering, and mathematics education, the strength of the Indian diaspora, and “financial digitization” to India’s boom. Former Ambassador of India to Kazakhstan, Sweden and Latvia, Ashok Sajjanhar, told the Sun that a measured approach to economic stimulus, prioritizing direct aid to citizens over excessive cash infusions, increased digitization and reduced corruption have played pivotal roles in India’s economic growth.

Focus on Ease of Doing Business 

India’s Wall Street appeal has also been heightened by its strategy of welcoming tenders for cutting-edge sectors such as critical mineral extraction and semiconductor manufacturing and technical collaborations in various sectors, including electronics and mobile phones. 

Setting up and maintaining a business in India was historically challenging, with a persistent fear of failure hindering entrepreneurship. The Modi government prioritized simplifying the start-up process to address this, enhancing India’s World Bank ranking. Key initiatives included the Pradhan Mantri Mudra Yojana, the government’s flagship 2015 scheme aimed at providing financial assistance to micro and small enterprises, and the 2016 Insolvency and Bankruptcy Code (IBC), which made the exit processes for investors more straightforward. These efforts contributed to India’s improved rankings in getting credit and resolving insolvency.

To make it easier for businesses to operate in the manufacturing hub of Tamil Nadu, for example, the state government simplified its administrative processes. Then there is the single-window clearance system, where businesses can submit all required documents and information to a single government office rather than deal with multiple departments. This system helps businesses get the necessary permits and approvals quickly and efficiently without dealing with various government agencies. 

Reduction in Extreme Poverty

Over the past decade, the overall strategy has also created jobs for millions of Indians entering the labor market every year in what was once one of the poorest nations in the world grappling with severe poverty. Official data released earlier this year affirmed that India has eliminated “extreme poverty,” which is defined by the World Bank as living on less than $1.90 per day without lack access to basic necessities like food, safe drinking water, sanitation, health care, shelter, education, and information. 

“(Economic policies) have significantly lifted more people out of poverty. But it doesn’t mean that there is still zero. We’re still not at a stage where we have zero poverty in our country,” said Mr. Ram. “But it has significantly improved.”

According to Mr. Vanavarayar, the policy of economic liberalization, technology enablement and widespread communication – meaning people even in the most impoverished places have access to smartphones – has enabled those in the “gig economy” to do much better. 

“A young person, a driver, delivery personnel have multiple options — they can do two jobs in a day, or a house help lady can work in six places using apps that (notify) for jobs,” he continued. “We wired the country and empowered people with things like mobile phones.”

India’s meteoritic financial rise isn’t without its share of criticism. 

“There is also a counter view that he (Modi) has set into motion regressive crony capitalism of the worst kind, which was unknown in India before. He is also being held responsible for widening the chasm between the rich and the poor by refusing to tax the rich and the corporates like in the developed countries,” Mr. Behuria contended, emphasizing that corporate tax in India is around 30 percent while world averages are 50 percent or more.

“(Modi’s) government’s own admission that it is supplying essential food items through a public distribution system. It is being said that he has mastered the art of perpetuating a condition where sprawling mass of Indians continue to survive at the subsistence level.”

Mr. Modi’s social policies, often seen by critics as favoring the Hindu majority, also risk unsettling a country with over 200 million religious minorities. The Prime Minister, newly into his third term, will also have to contend with a more fragmented government, making policy making increasingly challenging. 

While there were expectations that Mr. Modi would drive even more bold, business-friendly reforms in his third term, his Bharatiya Janata Party secured just 240 out of 543 seats in the lower house of India’s Parliament in the June election, significantly short of the 272 required for a one-party simple majority like it had in the last two elections in 2014 and 2019. This lack of majority means it will need support from other parties to push through these changes.

The likes of Mr. Ram are confident that the country has come too far economically to turn back. He emphasized that India has become more stable in terms of its rules and regulations, providing a more consistent environment for businesses and investors compared to years past and far less bureaucratic when it comes to obtaining licenses and permissions. Mr. Ram also pointed out that India has a large, young, and educated workforce, which attracts many foreign companies coming to India to take advantage of this talent pool. 

“Some companies are also setting up operations in India to reduce their reliance on China,” he added. “Additionally, the difficulty of obtaining visas in many developed countries makes it easier for foreign companies to establish operations in India.”