The recent terror attack in Pahalgam — where armed terrorists killed 25 tourists and a local guide — and India’s subsequent cross-border strikes over the past 48 hours have once again laid bare the precarious security landscape in South Asia. For the first time since 1971, Indian missiles struck deep inside Pakistani territory in a retaliatory display of military intent. These developments, though rooted in a decades-long rivalry, also spotlight a broader truth: India’s capacity to wield influence and defend its interests, both regionally and globally, depends as much on economic dynamism as on military resolve.

I argue here that India’s ambition to be counted among the world’s great powers hinges fundamentally on economic strength. From underwriting defense modernization to expanding diplomatic influence, the economy remains the cornerstone of India’s strategic posture. As India navigates a volatile neighborhood and asserts itself on the global stage, policymakers must ensure that economic heft grows in lockstep with geopolitical ambition.

Growth as strategic capital

Economic power has always underwritten geopolitical influence. India’s policymakers understand this well. Prime Minister Narendra Modi has repeatedly set out the ambition for India to become a $30 trillion economy by 2047, the centenary of independence. With a GDP currently ranking fifth globally and growth outpacing every major economy, India’s trajectory is promising. But ambition must meet scale: at present, India’s economy is just one-fifth the size of China’s. Even if China were to stop growing, India would need years of uninterrupted expansion to close the gap.

Still, the direction is clear. Rising GDP has allowed India to steadily ramp up its defense budget, now the world’s fifth largest at $86 billion. This dwarfs Pakistan’s $10 billion outlay and supports a force of 1.4 million active personnel, a nuclear arsenal, and growing air and naval capacities. Economic growth, in short, translates directly into strategic bandwidth. It buys not only weapons but time, options, and autonomy.

A key driver of India’s economic strategy has been the “Make in India” campaign, launched in 2014 with the goal of transforming India into a global manufacturing hub. However, when compared to China’s decades-long industrial policy — encapsulated in “Made in China 2025″—India’s progress has been uneven. While China executed a state-directed, export-led push with tight coordination between government, industry, and finance, India’s approach has been more fragmented, complicated by land acquisition issues, labor regulations, and patchy infrastructure. As a result, India’s share in global manufacturing remains modest, and the country has not yet emerged as a serious alternative to China in high-value supply chains.

To become a true great power, India must do more than chase GDP figures. It must address structural bottlenecks that constrain productivity: labor market rigidity, a fragmented agricultural sector, under-investment in research, and a still-nascent manufacturing base. Growth must be inclusive and employment-intensive. The services boom alone won’t suffice. To sustain influence, India needs deep capital markets, a robust logistics backbone, and an education system that produces globally competitive talent. Macroeconomic stability—anchored by fiscal prudence and inflation control—must remain non-negotiable.

From importer to innovator: defense and tech

India’s aspirations do not stop at higher spending. A more consequential shift is underway: the attempt to transition from one of the world’s largest arms importers to a self-reliant defense producer. Government data suggests domestic defense production reached a record ₹1.27 lakh crore in FY 2023–24, with nearly two-thirds of equipment now made at home. Platforms like the Tejas fighter jet and the Arihant-class submarine symbolize this pivot.

Atmanirbhar Bharat (“Self-Reliant India”) is not mere sloganeering. Policy tools — from FDI liberalization in defense to indigenization mandates — aim to cultivate an ecosystem where public-sector giants and private firms co-develop cutting-edge systems. The dividend is not only strategic; it’s economic. India’s defense exports have grown 30-fold in a decade, reaching ₹23,622 crore in 2024–25. The goal of becoming a net exporter of arms is within reach, if the momentum holds.

Yet bottlenecks remain, particularly in emerging domains such as artificial intelligence, cyber defense, and autonomous weapons. While global peers have accelerated civilian-military R&D integration, India’s institutional silos between academia, startups, and the military continue to stifle innovation. Funding for frontier research remains modest, and the absence of a clear AI strategy for defense is becoming more conspicuous. Indian AI startups lack access to military-grade data, and bureaucratic delays deter agile innovation.

But to consolidate its place among global powers, India must prioritize technological depth and resilience. This means ramping up defense R&D, incentivizing dual-use technology development, and streamlining procurement processes that remain opaque and slow. Building strategic partnerships that include technology transfer—rather than just arms purchases—is essential. India must also invest in emerging domains such as cybersecurity, artificial intelligence, and space-based warfare to remain competitive in the next generation of conflict.

Diplomacy backed by economic weight

India is increasingly using its market power as a diplomatic tool. Trade agreements with the UAE, Australia, and others signal a willingness to wield economic connectivity as soft power. Thirteen FTAs in five years and ongoing negotiations with the EU and UK underscore a strategic push to embed India in global supply chains.

The logic is straightforward. Greater trade ties make others more invested in India’s stability and growth. Whether through pharmaceutical exports during the pandemic, IT services, or semiconductor manufacturing incentives, New Delhi is working to position itself as a dependable node in a fracturing global economy.

Regionally, India’s economic heft undergirds its outreach to South Asian neighbors. Infrastructure investment in Nepal and Sri Lanka, power-sharing with Bangladesh, and credit lines to smaller nations reflect a long game: reduce China’s footprint while fostering interdependence. The strategy is clear-eyed and transactional — and increasingly, it is working.

To enhance its role as a rule-setter rather than a rule-taker, India must champion open trade, deepen regional connectivity, and strengthen multilateral economic frameworks. It should institutionalize its regional initiatives, provide consistent developmental financing, and use its digital and green economy leadership to shape emerging standards. India must also streamline its internal regulatory environment so that its global ambitions are not undercut by domestic inefficiencies.

A comparative edge: Pakistan and China

India’s superiority over Pakistan in economic and military terms is now a structural fact. India’s GDP is ten times larger; its defense spending nearly nine times as high. In any prolonged confrontation, this asymmetry constrains Islamabad’s options. India’s ability to retaliate after the Pahalgam attack with precision missile strikes is in part a function of economic capacity.

With China, the picture is more complex. China spends four times more on defense and maintains a dominant industrial base. But the Himalayan standoff has galvanized India’s strategic planning. From infrastructure along the LAC to deeper defense ties with the U.S. and Japan, India is hedging against Beijing’s dominance. Still, it recognizes the limits of confrontation. Closing the economic gap is not only desirable; it is necessary.

To meaningfully narrow the gap with China, India must transform its industrial capacity, especially in critical sectors such as electronics, semiconductors, and green technology. It must invest in frontier tech, enhance ease of doing business, and focus on workforce upskilling. Scaling up infrastructure in border areas and fostering strategic alliances with technology-sharing components will help counterbalance China’s lead. Importantly, India must also resist the impulse toward economic isolationism and instead pursue selective global integration to amplify its own scale and credibility.

Politics of power and prosperity

The economic-security nexus is also political. For the ruling BJP, national pride and development are entwined. A strong military posture resonates with voters, as does job creation and growth. This dual mandate has made reforms in infrastructure, tax, and labor politically palatable.

But political capital is finite. India must avoid the temptation to overspend on defense at the cost of social development. The budgetary strain from defense pensions and salaries already limits capital investments. Strategic ambition must not crowd out investment in education, health, and human capital — the true engines of long-term power.

To reconcile political incentives with strategic needs, India must build bipartisan consensus around long-term investments in human capital and innovation. Transparent defense budgeting, civil-military dialogue, and parliamentary oversight can ensure that military priorities do not outpace fiscal discipline. Strategic planning should be rooted in institutions, not personalities, allowing continuity across electoral cycles. Building an informed public discourse that understands the trade-offs of great-power pursuit is also critical.

Economics First, Always

India faces a challenging strategic environment: terrorist threats, hostile neighbors, and an unpredictable global order. Yet the path to enduring influence is not paved solely with missiles and tanks. It runs through factories, ports, universities, and digital infrastructure.

Economic strength does not guarantee global stature, but without it, stature is unsustainable. India’s policymakers would do well to remember that GDP is as critical a weapon as any in the arsenal. Keeping the economy growing, open, and innovative is not a distraction from national security — it is the very foundation of it.

To truly realize its great power ambitions, India must align its domestic reforms, regional strategy, and technological investments with a clear-eyed view of global power dynamics. Greatness will require institutional resilience, strategic patience, and a relentless focus on broad-based growth. The real test is not whether India can strike back against provocations, but whether it can build the economic architecture that deters them in the first place.