At the World Economic Forum (WEF) held in Davos 2025, India's economic prospects took center stage with discussions revolving around its digital economy, AI initiatives, and state-level investment prospects. The Indian government has been fervently working to position itself as a leader amid global economic shifts, emphasizing collaboration, innovation, and sustainability.
India's digital economy has experienced significant growth over the past decade, rising from 4-5% of GDP in 2014 to approximately 10% recently. The government aims to boost this share to 20-25% by the fiscal year 2025-2026, signifying its commitment to embedding technology deep within its economic framework. Venture capitalist Hemant Mohapatra cautioned, “With the advent of artificial intelligence, this gap threatens to widen,” indicating the need for India to reassess its entrepreneurship and investment strategies for the future.
Challenges surrounding the current innovation cycles were highlighted by Mohapatra, as these cycles predominantly favor developed economies. These cycles often demand heavy capital investment for foundational infrastructures, like those seen historically with the oil, railways, and semiconductor sectors. Starting with strong capital markets and supportive policies affirms nations' positions to leverage such cycles effectively.
To stay competitive, there is a pressing need for India to cultivate a thriving research and development (R&D) ecosystem. Mohapatra advocated for public-private partnerships aimed at commercializing innovative ideas, stating, “Historically, the United States has benefited from such ecosystems since the First World War.”
Initiatives promoting AI are gaining traction across India, with notable investments made recently. The Indian government allocated over $1.2 billion to bolster the AI sector as part of its 2024-2025 budget. This investment will significantly improve computing capabilities, finance local startups, and expand AI education, reflecting India's ambition to become substantially relevant within the global AI paradigm.
Simultaneously, Andhra Pradesh emerged as a focal point for investment discussions at the WEF, with Chief Minister Nara Chandrababu Naidu leading the charge for attracting global investments. Engaging actively at the summit, Naidu highlighted the state’s commitment to cutting red tape and promoting investor-friendly policies. He emphasized, “What differentiates AP from other Indian states is the speed of doing business,” advocating for the state’s investment-friendly roadmap known as ‘Swarna Andhra 2047.’ This strategic initiative targets transforming Andhra Pradesh's economy to reach $2.4 trillion by 2047.
Naidu showcased plans for establishing the Global Leadership Centre in Amaravati, underscoring the state’s ambitions for human resource development and entrepreneurial spirit. He addressed various prominent investment topics, including green energy initiatives and hydrogen production—areas expected to draw substantial investment moving forward.
Several notable global firms such as Microsoft, Cisco, PepsiCo, and Google are eyeing opportunities within Andhra Pradesh, reflecting the state's attractiveness as potential investment territory. Of considerable note was the interest from Petronas, who expressed intent to invest between Rs. 13,000 and Rs. 15,000 crore for green ammonia production, showcasing the state’s strategic positioning for sustainable investments.
On the broader market front, fund managers at Davos expressed confidence in India as they noted it remains among the more attractive choices for medium-to-long-term investments. Despite challenges posed by foreign capital outflows—over $31 billion since October—the outlook for Indian markets remained positive according to various investment stakeholders.
Saira Malik, Chief Investment Officer at Nuveen, stated, “I think having India as part of your Emerging Markets portfolio makes a lot of sense,” capturing the sentiment among investors weighing their options amid global market fluctuations.
Interestingly, even amid the anticipation of economic growth softening to around 6.4% for the subsequent fiscal year, optimism persists—especially concerning innovation and investment prospects. Rishi Kapoor from Investcorp articulated the view, “When you have 6%-7% growth in real terms and 10%-12% nominal growth, you can support an investment thesis.”
The discussions during the WEF highlighted India's aim to align with global market trends—pushing for innovative and resilient economic strategies as it navigates through the complex contours of current and future global economic landscapes.
Meanwhile, Malaysian sovereign wealth fund Khazanah's Managing Director Amirul Feisal expressed bullish sentiments about India's performance and potential returns, stating, “It’s been very good for us…especially for innovation.” The upcoming budget announcement on February 1 and the new Reserve Bank of India's monetary policy decision are closely watched indicators of India's fiscal management strategy.
Experts converge on the notion of India becoming 'the new China' as its demographic advantages and technological strides align with global investor interests. Jennifer Grancio of TCW Group hinted at the influx of new capital flow directed toward the Indian market, projecting sustained growth propelled by domestic innovation.
Conclusively, India's presence at Davos underscored its intent to engineer substantial economic partnerships and epitomize resilience even amid challenging global circumstances. Investments from both domestic and global stakeholders reaffirm India's commitment to cultivating innovation and sustainable growth environments—aiming for significant long-term prosperity and stability.