The changing template of global growth—and what it means for India

The fast-changing conditions make it impossible to make credible medium-term predictions, with persistent VUCA-ness significantly changing the contours of world growth. The impact could be long-lasting, especially for an emerging market like India, which is aspiring to clock 7% plus growth for long enough to push itself into the league of developed nations. The International Monetary Fund’s World Economic Outlook database offers a large set of cross-sectional data to examine changing patterns of global growth.

A deeper look into the data reveals three trends: world growth is highly concentrated, disruptions from the West Asia war and AI are having opposing impacts for now, and AI participation has become a growth wild card. The bulk of global growth comes from a small number of countries, implying that growth is highly concentrated. To assess a country’s contribution to global real growth, the IMF combines two measures: the country’s real economic growth in domestic currency and its share of world GDP at purchasing power parity (PPP).

The former measures how fast the economy is growing. The latter measures the size of the economy relative to the world, adjusted for inflation differences, and this decides the weight to be given to its growth rate. To illustrate, Bahrain’s GDP shrank by 11.2% in 2026, but the impact on global growth was minuscule because it is a small economy, with its GDP accounting for less than 0.05% of world GDP in PPP terms.

On the other hand, China’s 4.4% real growth matters more because its share of world GDP is as large as 19.8%. In 2026, 32 economies contributed just over 95% of global growth, down from 58 in 2025. China alone brought in 28%, and the top three—China, India, and the US—contributed nearly 60% of world GDP growth. This creates systemic risk—a sharp downturn in either the US or China will reverberate around the world and trigger slowdowns in many countries.

It also gives the top two growth drivers considerable economic leverage, which is increasingly being used. US’s withholding of advanced chip sales to China and China’s export controls on key rare earths are examples of how economic advantages are being weaponized. Global growth is estimated at a resilient 3.1% in 2026 despite two ongoing wars and the greatest oil supply shock since the 1970s. The war in West Asia and the surge in AI-related investments pull growth in opposite directions.

At a global level, the AI boom has offset the negative impact of higher oil prices. But resilience in aggregate growth conceals country-specific pockets of uncertainty. Thus, GDP growth for the world and the emerging market group has been higher than forecast for three consecutive years, but the same is not true for individual emerging economies. For instance, India and China underperformed in 2022, while the Russian economy grew far more than predicted.

Last year, Russia was the only country in the BRICS group to underperform. Participation in the AI story has emerged as the key growth differentiator between countries. The macroeconomic impact of AI operates in three phases: research and development to build frontier AI models; building AI infrastructure; and implementation of AI use in businesses and daily transactions. Currently, the economic benefits of AI are being enjoyed by a handful of countries that dominate the first and second phases.

The US and China lead the world in AI innovation, and they are also the largest recipients of AI-related investment. Smaller economies such as Taiwan, South Korea, the Netherlands, and Malaysia benefit from being key suppliers of AI-related hardware. Indeed, tiny Taiwan has been among the top five contributors to global growth for two consecutive years. India has defied these trends by maintaining a robust growth trajectory despite being a net energy importer and lacking a strong AI narrative.

But this growth momentum cannot be taken for granted. That is because the long-term impact of geopolitics and technology is largely unknown. With little control over external volatility, it is in our interest to focus on addressing two key domestic vulnerabilities. First, India lags in AI model development, but it has the conditions that favour large-scale AI adoption. There’s a large pool of AI-literate talent: India is ranked third globally in AI-related research articles published over the last decade, and its AI skill penetration rate is nearly three times the global average.

It scores well on policy vision and commitment and the government’s ability to deliver e-services (Oxford’s Government AI Readiness Index 2025). With a large young population, 800 million smartphones and over 100 million weekly ChatGPT users, there is a strong market for AI tools. The challenge is to adapt AI models to domestic use cases and to use them to raise productivity. Turning AI adoption into productivity gains, and those gains into higher GDP growth, will take time.

Meanwhile, India needs capital to fund enabling infrastructure, and investors need macroeconomic stability. The past few years have shown that the old model of financing current account deficits with capital inflows may not work in a world of volatile capital flows, geopolitical risk, and trade disruptions. Within the group of large economies, India has one of the worst net international investment positions for an emerging economy.

Until it improves its current account balance and attracts stable foreign capital, its economy will remain vulnerable to external crises. Building a stronger national balance sheet is fundamental to growth resilience. The author is an independent writer in economics and finance.