[News Terms] The Rise of the Indian Economy: 'Modinomics'

Economic Policy Focused on Manufacturing Growth Since 2014
Pro-Business, High Growth, and Virtuous Cycle Structure
Projected to Become the World's 2nd Largest Economy by 2037, Surpassing China

Hyundai Motors India (HMI), the Indian subsidiary of Hyundai Motor Company, was newly listed on the Indian stock market on the 22nd, raising a record-breaking 4.5 trillion won. This marks 28 years since Hyundai's entry into the Indian market.

Jung Eui-sun, Chairman of Hyundai Motor Group, said at the listing ceremony held at the National Stock Exchange (NSE) in Mumbai, "We increased investment and created jobs because we knew that India is the future." On the previous day, the 21st, Chairman Jung met with Indian Prime Minister Narendra Modi and expressed his commitment to participate in India's electric vehicle expansion policy. India, the world's most populous country with 1.4 billion people, is one of the world's top three automobile markets along with China and the United States, but its vehicle ownership rate is only about 8%.

Behind India's automotive industry development policy is 'Modinomics.' Modinomics is a term combining the name of Indian Prime Minister Narendra Modi and economics. Since taking office in 2014, Prime Minister Modi has pursued economic policies for sustainable growth and a leap to the G3 over ten years.

Hyundai Motor Group Chairman Chung Eui-sun (left) is shaking hands and posing for a commemorative photo with Indian Prime Minister Narendra Modi at the Prime Minister's Office in Delhi, India, on the 21st (local time).
[Photo by Yonhap News]

Modinomics aims for pro-business and high growth. It focuses on establishing a virtuous cycle structure where private investment activation promotes employment and consumption, which in turn leads to further investment. Detailed policies include 'Make in India,' 'Smart Cities,' and 'Digital India.'

'Make in India' is the core of Modinomics. It is a policy implemented since 2014 to attract manufacturing plants of foreign companies to India to create jobs and lay the foundation for sustainable growth. The Indian government provides various incentives, subsidies, and tax refunds to foster manufacturing and attract investment. Among them, the 'Production-Linked Incentive' is a policy that provides subsidies to companies in the form of 4-6% of the increased sales of products manufactured in India.

'Smart Cities' is a policy aimed at improving quality of life and achieving balanced regional development by solving problems such as housing shortages, energy shortages, and pollution caused by rapid urbanization. The urban population in India is expected to nearly double from 480 million in 2020 to 870 million in 2050. In response, the Indian government announced a plan to build 100 smart cities in 2015. So far, 7,742 projects have been completed in 100 cities, and 35% of the Indian population lives in smart city development areas.

'Digital India' is a digital transformation policy led by the Indian government since 2015 to implement digitalization across society. With an investment of $18 billion (20 trillion won), the goal was to build digital infrastructure such as internet networks in 250,000 villages and introduce electronic documents and electronic signature systems by 2019 to expand digital accessibility for Indian citizens. Since implementing this policy, 110,000 startups have been created, and more than 110 of these companies have become unicorns.

It is predicted that by 2037, India will rise to become the world's second-largest economy, following the United States.
[Photo by Akyung DB]

India continues to sustain high economic growth at an average annual rate of around 7% through Modinomics, based on its massive population and domestic market. In 2021, India surpassed its former colonial ruler, the United Kingdom, to become the world's 5th largest economy by GDP. The International Monetary Fund (IMF) forecasts that by 2027, India will surpass Germany and Japan to become the world's 3rd largest economy. There are also predictions that by 2037, India will even overtake China, currently ranked 2nd.

As India's status rises in the international community, major countries including the United States have sought to strengthen relations with India. South Korea also reached an important turning point in Korea-India relations when the Moon Jae-in administration launched the 'New Southern Policy' in 2017. Currently, India is South Korea's fourth largest trade surplus partner. Last year, the trade balance with India recorded a surplus of $11.2 billion (13 trillion won), achieving an all-time high.