The Fourth Economy Without Engines, India’s Paradox of Scale and the Quest for Global Brands

The Fourth Economy Without Engines, India’s Paradox of Scale and the Quest for Global Brands

India’s ascent to becoming the world’s fourth-largest economy is a statistical fact that inspires both awe and introspection. Yet, as a thought-provoking analysis points out, this milestone is shadowed by a profound and unique paradox: India is a global economic outlier that has achieved monumental scale without the corresponding power of global corporate giants. Unlike the historical trajectories of Germany, Japan, China, and even smaller South Korea—each of which rode to economic prominence on the back of world-conquering brands and industrial champions—India’s rise appears curiously “engine-less.” Its corporate landscape, while formidable domestically, punches “way below its weight” on the global stage. This gap between national GDP and corporate global heft is not merely a matter of prestige; it is a critical vulnerability that raises urgent questions about the sustainability of India’s growth, the quality of its economic development, and the policy choices that have led to this distinctive, and potentially limiting, model.

Part I: The Historical Blueprint: How Giants Forged the Fourth Economy

To understand India’s anomaly, one must examine the historical playbook. When West Germany achieved its Wirtschaftswunder (economic miracle) and became the world’s fourth-largest economy in 1960, it was synonymous with engineering excellence and iconic brands. Mercedes-Benz and Volkswagen (with the ubiquitous Beetle) defined automotive quality and mass mobility. Siemens dominated power and industrial equipment, BASF led in chemicals, and Bosch became a global standard in engineering and consumer goods. These were not just companies; they were global ambassadors of German precision, quality, and reliability, funded and supported by a robust banking system like Deutsche Bank.

Japan’s path to the #4 spot was paved by what the article terms the “three Cs”: cars, coolers (consumer electronics), and colour TVs. Sony, with its Trinitron TVs and Walkmans, wasn’t just a manufacturer; it was a cultural icon of innovation and cool. Toyota’s implementation of Total Quality Management (TQM) revolutionized global manufacturing, turning the Corolla into the world’s best-selling car. Seiko, Nikon, and Canon displaced established European rivals. Japanese growth was the story of corporate titans conquering global markets with superior products.

China’s arrival as the fourth-largest economy in 2005 was already marked by the nascent power of its national champions. While still early in its development, Chinese companies like Lenovo (which bought IBM’s PC division) and Haier (with billboards in Tokyo and offices in New York) signaled a deliberate move up the value chain. Crucially, this corporate expansion was underwritten by the colossal financial muscle of state-backed banks like ICBC, which would soon become the world’s largest. China’s model combined state capitalism with an aggressive drive to build scale and global market share.

Even South Korea, with a fraction of India’s population and land, demonstrates the power of branded scale. With 14 companies on the Fortune Global 500, it boasts Samsung (a tech and electronics behemoth), Hyundai and Kia (automotive giants), and LG (a diversified consumer and industrial leader). These companies command premium pricing, define technological trends, and generate immense profits from global operations.

In each case, the journey to economic superpower status was inextricably linked to the creation of private-sector corporations that became household names worldwide, synonymous with quality, innovation, and value.

Part II: India’s Distinctive (and Deficient) Model: Scale Without Giants

India’s story is conspicuously different. As the article starkly illustrates, when India crossed the threshold to become the world’s fourth-largest economy, its corporate representation on the global stage was shockingly modest. In 2025, the highest-ranked Indian company on the Fortune Global 500 stands at #84. There are only nine Indian companies in total on the list: five are public sector undertakings (like Indian Oil and SBI), with the remaining being Reliance Industries, HDFC Bank, ICICI Bank, and Tata Motors.

This reveals several structural features of the Indian economy:

1. The Public Sector Burden: A significant portion of India’s corporate heft remains in state-owned enterprises, which are often domestically focused, less efficient, and not designed to be agile global competitors.

2. The Domestic Concentration: Even its leading private companies—the Tatas, Mahindra, Infosys, Reliance—derive the bulk of their revenue and focus from the vast Indian domestic market. Their international footprints, while growing, are not dominant in their respective global sectors.

3. The IT Services Mirage: India’s $300-billion IT services industry is a genuine success story, providing critical back-office and technical support to the world’s largest corporations. However, as the article bluntly notes, “none of the IT giants have a marquee brand or product.” They are valued for cost-arbitrage and execution efficiency, not for proprietary technology, consumer-facing products, or brand premium. There are 34 technology companies on the Fortune 500; none are Indian. This highlights a gap between providing services for global tech and being global tech.

4. The Missing “Product” Powerhouse: India lacks a Samsung in electronics, a Toyota in automobiles, a Siemens in industrial engineering, or a Sony in consumer innovation. Its companies are strong regional players or efficient B2B service providers, but not global category kings.

The article offers a compelling theory: “The ability to build scale at home enables expansion abroad.” This worked for America, Germany, Japan, China, and Korea. Their companies honed their products and business models in competitive domestic markets before exporting them globally. India, with its massive domestic market of 1.4 billion consumers, should have been the perfect launchpad. Yet, this has “not quite played out.” Why?

Part III: The “Friction in the System”: Why India Doesn’t Build Global Giants

The analysis points to deep-seated, systemic “friction” that stifles the emergence of global champions. These are not just policy gaps but existential constraints.

1. Chronic Under-Investment in R&D: This is the foundational failure. South Korea spends 4.6% of its GDP on research and development, Japan 3.4%, Germany 3.13%, and China 2.5%. India spends a paltry 0.7%. This deficit is reflected in patent filings and is directly responsible for the lack of breakthrough, proprietary technologies. Companies focused on low-margin services or trading do not invest in the deep, risky, long-term R&D that creates global product brands. The state’s own underfunding of public science and technology institutes further cripples the innovation ecosystem.

2. “Regulatory Cholesterol” and Judicial Delays: India’s business environment, despite improvements, remains hampered by bureaucratic red tape, overlapping regulations, and a painfully slow judicial system. Land acquisition, environmental clearances, and contract enforcement are protracted processes. This “friction” increases the cost and risk of doing business, discouraging the large-scale, long-gestation manufacturing and industrial projects that typically produce global giants. Companies learn to navigate complexity rather than conquer markets.

3. Opportunistic Taxation and Policy Volatility: The fear of retrospective tax claims or sudden policy shifts (like export duties) creates an environment of uncertainty. For a company considering a decade-long, multi-billion-dollar bet to build a world-class factory or a new technology platform, policy predictability is paramount. India’s history of tax disputes and abrupt regulatory changes has, at times, shaken investor confidence and incentivized short-termism over monumental ambition.

4. A Financial System Averse to Long-Term Risk: While improving, India’s banking and capital markets are still more comfortable funding asset-backed businesses, trade, and sure-shot services exports than they are funding high-risk, deep-tech, or capital-intensive manufacturing ventures with long payback periods. Contrast this with the role of German Hausbanken or South Korea’s chaebol-supporting banks in nurturing industrial champions.

5. The Missed Opportunities in Public Champions: The article raises a poignant question: why are globally competent entities like ISRO (with its world-class space launch capabilities) or the National Payments Corporation of India (NPCI, which runs the revolutionary UPI) not structured to compete globally like SpaceX or PayPal? The state’s inability or unwillingness to commercialize its own technological successes and spin them off as aggressive global competitors represents a massive lost opportunity.

Part IV: The Inflection Point and the Path to “Viksit Bharat”

The article positions India at an “inflection point.” The recently announced trade framework with the US, while “an agreement to talk, agree to agree again,” symbolizes a forced opening. It “lifts uncertainty” and “trims tariff” but also promises to expose Indian industry to greater global competition. This external pressure, if coupled with the right internal reforms, could be the catalyst for change.

The road to a “Viksit Bharat” (Developed India) cannot be paved by domestic consumption alone. A nation of 1.4 billion people can drive impressive GDP numbers through internal demand, but to achieve high-income status, generate high-quality jobs, and command strategic autonomy, it must excel on the global stage. This demands a fundamental reorientation of economic policy from managing a large, protected market to fostering globally competitive corporations.

The required “bold policy pivots” include:

1. A National Mission for R&D: Dramatically increase public and incentivize private R&D spending to at least 2% of GDP within five years. Create innovation clusters with world-class infrastructure and link them to industry.

2. Rationalizing the “Friction”: A sustained, ruthless focus on streamlining regulation, speeding up the judicial process for commercial disputes, and establishing a reputation for stable, predictable, and transparent taxation.

3. Reimagining Public Sector Capabilities: Transform high-performing, globally competent public entities like ISRO and NPCI into commercial arms or public-private partnerships with mandates to compete internationally, attracting top talent and private capital.

4. Fostering a Culture of Product and Brand Building: Move the national narrative beyond IT services and generic pharmaceuticals. Actively support sectors with potential for global product leadership—renewable energy tech, electronics manufacturing, specialty chemicals, automotive EV components—with targeted industrial policies, not protectionism.

5. Facilitating Patient Capital: Develop deeper capital markets, encourage pension and insurance funds to invest in venture capital and private equity, and create financial instruments that fund long-term, high-risk industrial projects.

Conclusion: Beyond the GDP Ranking

India’s achievement as the fourth-largest economy is a testament to the sheer momentum of its demographic and entrepreneurial energy. However, the lack of global corporate giants is the economy’s “missing engine.” It points to a growth model that has prioritized scale and services over innovation and industrial depth. The historical lessons are clear: economies that rise to lasting prosperity do so by creating companies that the world cannot do without.

The “social smog” of triumphant rhetoric versus sceptical despair, as mentioned in the article, is a distraction. The real task is a sober, strategic, and collaborative “dialogue between the State and the private sector” to systematically remove the frictions that hold Indian ambition back. The goal must be to transition from being a nation known for running the back offices of the world to one that powers its factories, drives its cars, operates its networks, and defines its next technological leaps. Until India builds its own Samsungs, Toyotas, and Siemens, its position as an economic superpower will remain statistically impressive but structurally incomplete. The fourth economy must now find—or forge—its engines.

Q&A Section

Q1: The article argues India is an “outlier among outliers” for reaching the fourth-largest economy without global brands. How does this lack of global corporate heft impact the quality and sustainability of India’s economic growth?

A1: The absence of global corporate giants impacts India’s growth in three critical ways, making it less sustainable and of lower quality:

• Value Capture: Global brands command premium pricing and capture a larger share of the value chain. India’s IT services and generic pharmaceuticals, while large in volume, compete largely on cost, leading to thinner profit margins. This limits the capital available for reinvestment in R&D and high wages, creating a middle-income trap risk.

• Job Quality: Global product companies typically create more high-skilled, high-wage jobs in R&D, design, advanced manufacturing, and global management. India’s service-led model creates many jobs, but a disproportionate number are in lower-value-added support functions. The lack of industrial giants also weakens the crucial manufacturing ecosystem that creates mass, stable employment.

• Strategic Vulnerability & External Dependency: Without control over key technologies and global supply chains (in semiconductors, advanced machinery, critical materials), India remains dependent on foreign corporations. This undermines its strategic autonomy, as seen in supply chain disruptions. An economy driven by domestic consumption and low-margin services is more vulnerable to external shocks and less influential in shaping global economic rules.

Q2: The analysis highlights the stark contrast in R&D spending between India (0.7% of GDP) and peers like South Korea (4.6%). Why has India consistently under-invested in R&D, and what are the direct consequences for its private sector?

A2: India’s chronic under-investment in R&D stems from a confluence of factors:

• Historical Policy Focus: Post-independence, policy focused on self-sufficiency through import substitution and building heavy industry (Steel, Mining, Power) through public sector units, not on frontier innovation. The license-permit Raj stifled competition, removing the incentive for private R&D.

• Service-Led Growth Path: The accidental success of IT services from the 1990s created a lucrative, low-risk growth model that did not require heavy R&D. It reinforced a comparative advantage in “process innovation” (delivery efficiency) over “product innovation.”

• Fiscal Constraints and Misplaced Priorities: Governments have perpetually faced budget constraints, and R&D spending—with its long-term, uncertain returns—has often been sacrificed for more immediate populist spending or physical infrastructure.
  Consequences for the private sector are severe: It lacks the foundational science and technology base from universities and national labs that companies in other countries leverage. This raises the cost and risk of innovation for individual firms, discouraging investment. It traps companies in business models of adaptation, reverse-engineering, or service provision, rather than pioneering new technologies. The result is a private sector that is excellent at “juggad” (frugal innovation) for the domestic market but lacks the technological moats to build defensible global product brands.

Q3: The article questions why ISRO or NPCI aren’t global competitors like SpaceX or PayPal. What are the institutional and cultural barriers within India’s public sector that prevent such globally competitive commercial spin-offs?

A3: The barriers are deep-rooted in the design and culture of India’s public sector:

• Mandate and Mindset: ISRO’s mandate is space exploration and national development (communication, imaging), not commercial profit. It is a mission-oriented scientific agency, not a market-driven company. Its culture values scientific achievement and bureaucratic procedure over speed, risk-taking, and customer acquisition—the hallmarks of a SpaceX.

• Lack of Autonomy and Incentive Structures: Public sector units (PSUs) operate under intense bureaucratic and political oversight, with rigid staffing rules, salary caps, and procurement processes. They cannot offer the stock options, agile decision-making, or competitive salaries needed to attract and retain world-class commercial talent. A scientist at ISRO is not incentivized to monetize technology.

• Fear of Failure and Lack of Commercial Expertise: The public sector is risk-averse because failures become political scandals. There is also a sheer lack of in-house expertise in global marketing, venture scaling, intellectual property monetization, and competitive strategy. NPCI runs a brilliant domestic payments rail (UPI) but lacks the organizational DNA to package and sell it as a global software product against rivals like PayPal.

• Political and Bureaucratic Hurdles: Any move to commercialize or partially privatize a successful state asset like ISRO would face immense political opposition framed as “selling the family silver,” alongside bureaucratic turf wars.

Q4: The “trade pact” with the US is described as a “strategic time-out” and a “framework.” How could this external pressure actually serve as a catalyst for India to address its lack of global corporate champions?

A4: The trade framework, by lowering tariffs and promising greater market access, acts as a double-edged sword that could catalyze change:

• Forced Competitive Upgrade: Easier access for US agricultural and manufactured goods will increase competition in the Indian market. To survive, Indian companies cannot rely solely on domestic scale and protection. They will be forced to improve quality, efficiency, and innovation to retain market share, potentially building the muscle needed to compete abroad.

• Access to Technology and Capital: The agreement could facilitate joint ventures, technology transfers, and increased FDI from US firms in advanced sectors. Indian companies could integrate into higher-value segments of global supply chains, moving from generic suppliers to specialized partners, a stepping stone to building their own brands.

• Policy Rationalization Under Scrutiny: The negotiation process itself forces India to scrutinize and rationalize its own “regulatory cholesterol” and non-tariff barriers, as these become sticking points. This external pressure can provide the political cover for the government to push through difficult domestic reforms that improve the business environment for all companies, including potential global champions.

• Shift in Corporate Ambition: Exposure to a vast, sophisticated market like the US can expand the ambition horizon of Indian entrepreneurs. The mindset could shift from “How do I win in India?” to “What do I need to win in the world?” The “strategic time-out” before full implementation is India’s window to prepare its industry for this leap.

Q5: The article calls for a dialogue between the State and private sector, “not the 11/10 post-budget kind.” What would a substantive, outcome-oriented dialogue for fostering global giants entail, and what should be its first two agenda items?

A5: A substantive dialogue must move beyond ceremonial consultations and into structured, problem-solving partnerships. It would entail regular, closed-door sessions between key policymakers (from Finance, Commerce, DPIIT, MeitY) and the CEOs/founders of India’s most promising and ambitious private companies, along with leading venture capitalists and technology innovators.
First Two Agenda Items:

1. Creating a “Global Champion” Regulatory Sandbox: Identify 3-4 strategic sectors (e.g., EV batteries, drone tech, semiconductor design, agri-tech). For selected companies in these sectors with proven potential, create a fast-track, single-window clearance mechanism that shields them from general “regulatory cholesterol” for a defined period (5-7 years). This sandbox would provide regulatory certainty, faster approvals, and dedicated government liaison to help them scale rapidly to global size without being bogged down by routine delays.

2. Designing a “Patient Capital for Pioneers” Fund: Co-create a fund structure, with anchor investment from the government (via SIDBI or a new vehicle) matched by private capital, specifically dedicated to funding high-risk, high-reward R&D and capital expenditure for companies aiming to create proprietary global products (not services). This fund would have a 15-20 year horizon, accept higher failure rates, and be managed by professional investors with sector expertise. Its mandate would be explicitly to build global product companies, not just generate financial returns. This directly addresses the twin failures of inadequate R&D funding and risk-averse capital.