The increasing digital divide between the Indian rural and urban population coupled with the lack of infrastructure poses serious challenges to its economic potential. With disruptive economic structures, India’s economic struggle can have a  ripple effect on the global economy.

The Global Risk Report 2023 issued by the World Economic Forum just prior to the annual meeting in Davos this year has characterized some critical factors that identifies India’s hidden weaknesses and vulnerabilities, making India one of the most serious threats to future global economic stability. 
The 2010s saw global military expenditure growing in line with GDP and government budgets (5% of expenditure, down from 12% in the early 1990s). However, today, global military expenditure as a proportion of GDP is rising, driven predominantly by higher spending by the United States of America, Islamic Republic of Iran, Russia, India, China, and Saudi Arabia. India has shown an increase in allocations for the Ministry of Defence (MoD) by 9.8 percent to INR 5.25 trillion (approximately USD 70.6 billion). This does not, however, cover MoD’s two main items of expenditures. Those items are separately accounted for under the Defence Pensions and MoD (Civil) heads. 
As per the data shared by the Observer Research Foundation, the Indian MOD’s entire allocations, whether gross or net, do not reflect India’s true defense spending. Some large expenses–especially those related to the four border guarding forces (BGFs) and India’s defence-related nuclear, space and cyberspace activities conducted outside the MoD-controlled entities–are incurred by some other ministries or departments. India’s actual defense spending is thus much greater than what is reflected in the MoD’s allocations. Table 1 shows the net budget of the MoD and those of the four BGFs which are part of the Ministry of Home Affairs (MHA). As can be seen, of India’s larger defence budget of INR 5.7 trillion, nearly 8 percent is spent through the MHA for the defense of the country’s external borders. The defense budget breakup is as follows: 
The Indian Army had revealed that 68% of army’s equipment is in the ‘vintage category’, 24% in the current and 8% in the state-of-the-art grouping, and consequently, insufficient funds are certainly not going to remedy this worrying state of affairs. This indicates that India’s defense budget will increase on an average of 8%-10% per annum just to replace the equipment over the next 8-10 years timeframe. A substantial undertaking that India needs to take over is its undernourished population.
However, in the face of rising humanitarian crises and the state’s instability, water infrastructure continues to be used both as a weapon and target, mirroring past water conflicts and terrorism in India, Pakistan, and Afghanistan.

India faces the greatest threat and risk on digital inequalities and lack of access to digital services to its society and citizens’ classifications, with a fractured and unequal access to digital networks and technologies stemming from under investments, low digital skills, insufficient purchasing power, or government restrictions on technologies.

When the World Economic Forum asked over 12,000 global business experts: “Which five risks are the most likely to pose the biggest threat to your country in the next two years?” and were asked to select these from a list of 35 risks, India’s top risks were identified from digital inequality to the erosion of social cohesion to climate change as the greatest risks that have global implications.
India faces the greatest threat and risk on digital inequalities and lack of access to digital services to its society and citizens’ classifications, with a fractured and unequal access to digital networks and technologies stemming from under investments, low digital skills, insufficient purchasing power, or government restrictions on technologies. The rural-urban digital divide in India can creat multiple India’s with a significant socioeconomic and political implication divides. Despite registering a significant (digital) growth rate of 13 percent in 2021-22, only 31 percent of the rural population in India uses the internet compared to 67 percent of the urban population.
The digital divide in the access and usage of ICTs and the internet has also led to an exclusionary consequence in three sectors of utmost significance: education, health, and finance. In a country plagued by high socioeconomic inequality, the digitalisation process cannot be posited as the panacea for the inherent challenges of the physical world. It becomes particularly problematic when half of the population neither has access to gadgets and the internet or the technological know-how to move to a digital environment. In such circumstances, the digitalization process becomes unequal, favoring the digitally connected while excluding the rest, and in certain cases, exacerbating the already existing inequalities. 
The data on India shows that there is evidence of a palpable digital divide between the rich and the poor, the urban areas and rural areas, men, and women and different caste and religious groups. This divide mirrors the existing socioeconomic inequalities—it means that often the most marginalized groups have been the least digitalized whereas the privileged groups reap the benefits of digitalization. The digital divide is also prominent between rural and urban India.

 S&P Global has identified that infrastructure may be India's stumbling block, or if not done right, it could be the key to the country's failure for economic potential, making it difficult to sustain the largest population in the world by 2050, creating a global depression that can engulf major Indian allies on economic and political fronts. 

More than 270 million households in India are facing economic stress. A broad section of population has shown inability to maintain its current lifestyle due to increases in the cost of essential goods which are not matched with a rise in real household income. The 2019-2021 data shows that about 16.4 per cent of India's population lives in poverty, with an average intensity of 42 per cent. About 4.2 per cent of the population lives in severe poverty. About 60% of India’s more than 1.4 billion people lives on less than $3.10 a day, the World Bank's median poverty line. And 21%, or more than 250 million people, survive on less than $2 a day. 
The other destabilizing factor India faces is the growing median age population (28.4 years in 2023). The median age for India would be crossing 38.1 years by 2050 making India the most populus country in the world with a population of more than 1.64 billion people. The challenge India has today is that 65% population still lives in rural India, where connectivity, education and poverty are moving towards deteriorating social cohesion. 

India’s ability to deal with its debt crisis can be a mamoth task in the coming years. Collapse or lack of social services and public infrastructure can create serious constraints. The recent COVID-19 pandemic has highlighted the fault lines in India’s health and social infrastructure, in a situation where transportation infrastructure capacity constraints continue to limit corporate performance and investments.
S&P Global has identified that infrastructure may be India's stumbling block, or if not done right, it could be the key to the country's failure for economic potential, making it difficult to sustain the largest population in the world by 2050, creating a global depression that can engulf major Indian allies on economic and political fronts.
The prolonged economic stagnation in India can also limit its public policy options. The increasing poverty challenge is creating social divide among the Hindu majority and others, including the Muslims, Christians, and the Dalits, a silent minority that is increasingly capturing the socioeconomic space in the society, creating further rifts between the extremist Hindu intelligentsia and the growing Indian professionals.
The coming years will present tough trade-offs for the future Indian governments facing competing concerns for society, the environment and security. As the secular India’s tiranga is losing its colors into the shades of saffron extremism, India has its own set of complexities that can impact the global prosperity and put the balance at risk.
Geopolitical contestation of resources both at regional and global levels is also an identified risk. Deployment of economic levers by global and regional powers to decouple economic interactions can be a challenge between nations, restricting goods, knowledge, services, or technology with the intent of gaining geopolitical advantage and consolidating spheres of influence. India is thus on a confrontation path with China, Brazil and Russia in terms of competition in textile and information communications technologies, along with a race to dominate the Indian Ocean and the South China Sea region, which may have destabilizing consequences for the region. 

The author is a global competitiveness, risk, and development expert. He is a leading strategic communication specialist. 
Email: [email protected], Twitter: @amirjahangir.