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Marching Towards Third Largest Economy and Beyond - 3: Global Challenges

Bharat must grow 9-10% for 3 decades to be $ 35 Trillion economy by 2047 says NITI Aayog CEO Amitabh Kant. — Vinod Johri


In the previous two articles, we discussed the strengths and pillars of our economy. Bharat has marched from 10th largest economy to 5th rank and ready to board the 4th position in 2025 and achieve 3rdspot by 2027 with economy crossing $ 5 Trillion. The United States of America, China, Japan, Germany, and Bharat are the largest economies in the world in 2024, as per their GDP data. It is imperative to understand our strength and weaknesses realistically for marching beyond 3rd largest economy. GDP serves as a key metric for assessing the magnitude of a nation’s economy.  

United States 

The United States upholds its status as the major global economy and richest country, steadfastly preserving its pinnacle position from 1960 to 2023. Its economy boasts remarkable diversity, propelled by important sectors, including services, manufacturing, finance, and technology. The United States enjoys a substantial consumer market, fosters innovation and entrepreneurial spirit, possesses resilient infrastructure, and experiences advantageous business conditions.

The U.S. accounted for 25.4% of the global economy in 2022. The U.S. dollar is the currency of record most used in international transactions and is the world’s reserve currency, backed by a large U.S. treasuries market, its role as the reference standard for the petrodollar system, and its linked Eurodollar. Several countries use it as their official currency and in others it is the de facto currency. 

The largest U.S. trading partners are Canada, Mexico, China, Japan, Germany, South Korea, the United Kingdom, Taiwan, Bharat, and Vietnam. The U.S. is the world’s largest importer and second-largest exporter. It has free trade agreements with several countries, including Canada and Mexico (through the USMCA), Australia, South Korea, Israel, and several others that are in effect or under negotiation. 

The New York Stock Exchange and Nasdaq are the world’s largest stock exchanges by market capitalization and trade volume. In 2014, the U.S. economy was ranked first in international rankingon venture capitaland global research and development funding. The nation’s labour market has attracted immigrants from all over the world and its net migration rate is among the highest in the world. The U.S. is one of the top-performing economies in studies such as the Ease of Doing Business Index, the Global Competitiveness Report, and others.

Rank & Country                   GDP (USD billion)          GDP Per Capita (USD thousand)
1. United States of America                     27,974                                      83.06
2. China                                                 18,566                                       13.16
3. Germany                                              4,730                                       56.04
4. Japan                                                  4,291                                       34.55
5. Bharat                                                 4,112                                         2.85

The US economy has a strong impact on the global economy and vice versa. There are some factors to create a sustainable business amidst the fluctuations of the U.S. and global economies, that come into play include:

  • The synchronicity of U.S. and global business cycles
  • Global spillovers from U.S. growth and policy shocks
  • US trade and financial connections with nations around the world

The US President Joe Biden’s administration has restricted American companies from selling advanced semiconductor chips to China and banned US investment in China in sensitive technologies including AI, quantum computing and semiconductors.


The German economy strongly focuses on exports and is renowned for its precision in the engineering, automotive, chemical, and pharmaceutical sectors. It derives advantage from its proficient labour force, robust research and development initiatives, and a pronounced commitment to fostering innovation. Germany’s GDP is estimated to grow by just 0.2% as against previous estimation of 1.3%.


Japan’s notable economy is distinguished by its progressive technology, manufacturing prowess, and service industry. Prominent sectors encompass automotive, electronic, machinery, and financial domains. Moreover, Japan garners recognition for its unwavering work ethic, pioneering technological advancements, and exceptional exports of superior quality.


China has witnessed a notable upsurge in its economic progress, moving from the fourth rank in 1960 to the second rank in 2023. The Chinese economy predominantly hinges upon manufacturing, exports, and investment. Itpossesses an extensive workforce, robust governmental backing, infrastructural advancements, and an expeditiously expanding consumer market.

China has set an ambitious economic expansion target of around 5% for 2024, as its leaders vowed to “transform the growth model” in the face of significant challenges facing its development.

Chinese Premier Li Qiang seeks to boost confidence in China’s economy, while grappling with a troubled property sector, deflationary pressures, an exodus of foreign capital, a battered stock market and a record low birth rate.

China has unveiled its annual military budget for 2024, which will increase by 7.2% to 1.67 trillion yuan ($230.6 billion), according to a draft report released separately. The growth rate for the defence budget is the same as last year’s.China had gone too far toward prioritizing national security at the cost of economic growth, calling for the country to “ensure that high-quality development and greater security reinforce each other.”

As part of its strategic goals, China boosted its annual budget for science and technology by 10% to an unprecedented 370.8 billion yuan ($51.6 billion) — the biggest increase since 2019 after years of minimal growth.

The emphasis on self-reliance in science and technology comes after the United States tightened control over the export of cutting-edge technologies to China, especially in the field of AI, which Washington said could be used to strengthen the Chinese military.

Pitfalls in Chinese economy

Unsustainable levels of debt: Investment in infrastructure and property development have been core pillars of China’s growth, and for fifty years, the principal method of financing these projects has been debt at the local level. The claim is that, much like the ‘balance-sheet recession’ of Japan during the 1990s, this debt has reached a point of unsustainability, and China is now facing an inevitableslowdown of the economy.

Loss of confidence in economic policy: Another prominent view is that consumer confidence in the government and in the political system has finally burst, leading to a collapse in consumption, as citizens choose instead to save their resources in expectation of future and further downturns. In contrast to many Western countries that injected cash into the economy via stimulus packages, for both businesses and consumers, when the pandemic hit in China, the CCP largely did nothing to support its citizens financially. Altogether, this does not necessarily reflect a loss of faith in the government’s ability to steer the economy but can instead be explained by reduced income streams; citizens have chosen to save, in the face of poor economic conditions, and consumption will likely rebound as incomes recover.  

Poor management and bad luck: The extreme shutdown of Chinese society, the lack of any stimulus spending, and a hard turn in the geopolitical situation—especially in Sino-US relations—have combined to weaken the appetite for investment and new ventures amongst China’s entrepreneurs. 

While these factors will likely affect growth for the foreseeable future, there are also clear signs of strength in certain sectors of the economy. For example, there is robust investment in the manufacturing sector.  China is ranked first in the world in auto exports as of 2023 (domestic production is now equal to that of the US, EU, and Japan combined). China leads in clean energy technologies and accounts for 70-90% of sales at every stage of EV battery and solar production. 

FDI inflows into China fall to the worst in last 30 years. China’s direct investment liabilities in the balance of payments rose by $33 billion last year, 82% down in 2022. Profits of foreign industrial firms in China dropped 6.7%.

China’s Semiconductor manufacturing: In recent years, China has rapidly emerged as a powerhouse in the semiconductor industry, with several companies making significant strides in manufacturing and innovation. The top 5 China’s semiconductor Equipment companies highlight their contributions and impact on the global semiconductor landscape. The Chinese government announced a $10 billion investment in a new semiconductor equipment manufacturing plant in 2022.

  • SMIC (Semiconductor Manufacturing International Corporation) based in Shanghai is China’s largest and most advanced semiconductor foundry, offering integrated circuit (IC) manufacturing services on 200mm and 300mm wafers. SMIC provides a wide range of services, including wafer manufacturing, mask making, and wafer probing.
  • SMEE (Shanghai Micro Electronics Equipment) is considered China’s potential competitor to the Netherlands-based ASML, the world’s leading lithography machine manufacturer.
  • Advanced Micro-Fabrication Equipment Inc (AMEC) founded in 2004 and headquartered in Shanghai, China, is a leading manufacturer of micro-fabrication equipment for the semiconductor industry. They develop and produce equipment used in processes such as etching, chemical vapor deposition (CVD), and metal-organic chemical vapor deposition (MOCVD).
  • Naura Technology Group is a leading Chinese manufacturer of semiconductor equipment and electronic components. Founded in 2001 and headquartered in Beijing, the company has established itself as a major player in the domestic market and is expanding its global presence.
  • Yitang Semiconductors is a Chinese company that manufactures semiconductor equipment, specifically focusing on dry cleaning, etching, and thermal processing tools used in 12-inch wafer fabs.

No dream too Big

Bharat must grow 9-10% for 3 decades to be $ 35 Trillion economy by 2047 says NITI Ayog CEO Amitabh Kant. Union Ministry Hardeep Singh Puri asserted that Bharat can become $ 5 trillion economy much before 2028. Bharat now walks like a Colossus.

We can conclude by quoting A. Michael Spence, 2001 Nobel laureate in Economy “Among all major economies, India has the highest potential growth rate right now”. 

Vinod Johri: Retd. Additional Commissioner of Income Tax

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