A stagnating Chinese economy does not translate into a narrowing power differential vis-à-vis India. Even under a pessimistic scenario of China’s nominal growth rate at ~5% and an optimistic one for India at ~9%, New Delhi would still take at least four decades to catch up. Given that influence is a function of power, India’s persistent power gap vis-à-vis China limits its regional and global influence. Recent developments have further exposed the limits of India’s power and influence, not just vis-à-vis China, but also the United States.
In this context, India needs a roadmap for the next 10-15 years to acquire influence through asymmetric means. This essay outlines specific strategies at the intersection of trade, technology, and security for India to develop capabilities—and counter-capabilities—that create regional and global dependencies. The objective is to generate largely non-substitutable dependencies that can render countries vulnerable when leveraged.
Leveraging Market
India’s vast and expanding consumer market is often cited as its foremost economic strength. The critical question is whether India can transform this market into a coercive economic instrument. The answer is yes. The Indian market possesses all the essential elements to become a formidable source of diplomatic leverage.
According to World Data Lab estimates, India commands the world’s second-largest consumer base at approximately 530 million, trailing only China’s 960 million consumers.Over the past decade, China and India emerged as the dual engines driving global consumer expansion. In 2024, India added 33 million new consumers to its economy, surpassing China’s 31 million for the first time. This trend continues into 2025, with India projected to add another 47 million consumers, accounting for 37% of the global increase of 129 million.
While China is expected to become the first economy to exceed one billion consumers by 2026, India remains the only country capable of replicating this feat. Projections indicate that by 2030, India will host 773 million consumers compared to China’s 1.062 billion, leaving the U.S. a distant third at 348 million.
However, consumer base size alone does not guarantee higher consumer spending, which depends on two critical factors: relative purchasing power and propensity to consume. The U.S. dominates global consumer spending at $18.8 trillion annually. China, despite its $19 trillion economy and rising per capita income, ranks second with approximately $7 trillion—constrained by low consumption propensity. India currently holds fifth position with $2.2 trillion in annual spending, marginally behind Germany ($2.3 trillion) and Japan ($2.2 trillion), but ahead of the UK ($2.1 trillion) and France ($1.6 trillion).By year-end, India is positioned to become the world’s third-largest consumer spending economy.
India’s consumer market combines China’s demographic scale and America’s consumption propensity. Private consumption constitutes over 60% of India’s economy, compared to merely 40% in China. This means India will achieve a $7 trillion consumption market at just $11.6 trillion GDP—a threshold China reached only at $19 trillion GDP.
Despite ranking among the world’s largest markets, India has yet to convert this advantage into significant leverage. To transform its consumer market into a coercive economic instrument, India must cultivate market conditions characterised by openness, fairness, and minimal regulation. The absence of these three pillars severely constrains India’s market leverage capabilities.
Over the past decade, India has increasingly embraced protectionism. Unfair competition—including cronyism, monopolistic practices, discriminatory procurement policies, and opaque contract awards—further undermines market credibility. These problems are exacerbated by bureaucratic inefficiencies and excessive regulation.
Despite being among the world’s most lucrative markets, India significantly underperforms in comparison to Vietnam and Malaysia in attracting foreign investment.
Without genuine access for foreign goods and deep integration of foreign investments, the Indian market will continue playing a marginal role in economic diplomacy. A fundamental principle applies: the pain of losing market access invariably exceeds the disappointment of never gaining access.
India cannot simultaneously tout its market strength globally while pursuing protectionist policies domestically—these represent antagonistic approaches. India must secure foreign goods and investments within its market ecosystem by ensuring deregulation, openness, and competitive fairness.
The path forward requires India to abandon its protectionist instincts and embrace market liberalisation as a strategic imperative. Only through creating genuine dependencies—where foreign firms become deeply embedded into India’s consumer ecosystem—can New Delhi transform its demographic dividend into geopolitical leverage. The market’s coercive potential lies not in its closure, but in its indispensability to global economic actors.
Raising Economic Complexity
Recent export restrictions by both the United States and China highlight a stark reality: India possesses little leverage in this increasingly restrictive global trade environment. With minimal retaliatory tools, New Delhi often finds itself compelled to accept outcomes dictated by others.
The U.S.-China trade tensions have further revealed that dominance in even a narrow segment of a global supply chain—such as rare earth magnets—can generate powerful coercive leverage. These products, though far less sophisticated than advanced semiconductors, have nonetheless demonstrated their strategic value, at least in the immediate to medium term.
India lacks comparable counter-leverage. The fundamental reason lies in its low economic complexity. It is calculated based on the diversity of a country’s exports and their ubiquity, i.e., the number of countries that can produce the same goods. Nations with higher economic complexity possess a more sophisticated range of productive know-how, enabling them to manufacture an extensive array of products, including technologically advanced goods that few others can replicate.
An economy with higher economic complexity typically exports products with greater product complexity. In this context, economic complexity becomes not merely a measure of industrial sophistication but a determinant of strategic autonomy and global leverage.
India’s economic complexity score is pegged at 0.45,significantly lower than China’s 1.4.This disparity illustrates the asymmetry in how the two economies engage with the world. Higher economic complexity implies that an economy interacts globally through goods with greater embedded knowledge, thereby making others more reliant on its output. Conversely, India’s relatively low complexity (both economic and product) restricts its influence in the international trade system. The largest contribution of India’s export growth comes from low to moderate-complexity products.
To cultivate strategic leverage, India must therefore pursue policies that enhance its economic complexity by producing goods of greater sophistication.
The Harvard Atlas of Economic Complexity (HAEC) offers a “light-touch” approach, identifying adjacent product spaces into which countries like India could expand using its existing productive capabilities without needing any major technological or institutional overhauls.In other words, India already possesses sufficient foundational know-how to move into these industries with moderate policy support.
While the HAEC does not recommend that India pursue a parsimonious industrial policy (for short jumps into adjacent product spaces) or a strategic bets approach (for long jumps into advanced and high-value sectors), this essay recommends that India identify specific product categories that exhibit high product complexity—greater than 1.25—for targeted development through these twin strategies.
If domestic firms lack investment appetite, the government could emulate the Apple pathway. This approach, reflective of cooperative federalism, involved the Government of India and the Government of Tamil Nadu working, perhaps in silos but in a coordinated manner, in the past seven years to carve out exemptions and resolve complex land and labour issues to allow expansion of Apple’s iPhone assembly production line.And the results are impressive. In seven years, India’s electronics exports—which stood at $5.6 billion in 2016-2017 rose to $37.6 billion in 2024-25.That is a 570% increase in seven years. And Apple exports contribute to about half of India’s total electronics exports.
India should identify more such product spaces where Western firms seek alternatives to China. The German tunnel-boring manufacturer Herrenknecht is another such opportunity, especially as the company confirmed that the Chinese customs authorities were blocking their supplies meant for India. The strategy is similar to China+1, except it requires active intervention from India to incentivise relocation as opposed to foreign players being coerced by China or the U.S. to relocate.
The success of Apple’s expansion suggests this strategy is viable and can be replicated if sector-wide deregulation is pursued. Furthermore, any tendency to enforce domestic content requirements at the initial stages of relocation shall be curbed. Additionally, the Indian state must allocate capital judiciously rather than dispersing support across low-complexity sectors such as textiles, steel, food products, and white goods.
De-risking from China
India’s import profile reveals significant dependence on China in organic chemicals, machinery, and electronics. This makes India susceptible to immediate shock in case of disruption and vulnerable. However, because many of these imports fall within low to moderate product complexity, substitution is feasible in the short to medium term.
This implies that Beijing’s leverage over New Delhi is rather limited than assumed. Thus, one can argue that the nature of dependence equips India with leverage as well.
But to turn this dependence into strategic leverage, India needs to pursue calibrated de-rising, just enough to signal options and convey the message: any economic coercion to inflict maximum damage to India would be a one-off interaction. It will compel India towards forced diversification, thereby expending China’s leverage forever.
The Roadmap to Asymmetric Influence
Similar to how influence is a function of power, all forms of power—military, technology, diplomatic, and even cultural—are, at their very foundation, a function of economic strength. China’s trajectory since the 1980s demonstrates that economic expansion precedes and sustains influence. Thus, India’s most potent route to asymmetric power lies in harnessing its market potential, enhancing economic complexity, selectively replacing China in global value chains, and strategically de-risking from Chinese dependencies.