June 2025 / Q1 FY26

A Shifting Global Order

Periods of market calm are often when the most meaningful long-term investment decisions are made. Short-term volatility, tariffs, or rate cycles fade over time, but structural shifts in global power and economic leadership can redefine where and how wealth is created.

Today, many are questioning whether we are witnessing the early stages of a new global order — one marked by dedollarization, a multipolar power structure, and a gradual rebalancing of economic influence from West to East.

To frame our thinking, we turned to 500 years of economic history[1]. From the rise and fall of the Spanish Empire to Britain’s Industrial Revolution, the dominance of the United States, and the emergence of China, history offers valuable insights into how superpowers ascend, peak, and transition. Drawing from Twain’s perspective, we set out to answer four fundamental questions:

1. What drove U.S. dominance, and have other nations held similar roles?
2. Is there a cycle to global superpowers?
3. Does the decline of a dominant power disrupt global markets?
4. Can India emerge as a leading global economy in this evolving world order?

01What Drove U.S. Dominance, and Have Others Held Similar Roles?

The U.S. ascended to global economic leadership through substantial investments in education, technology, and innovation, which propelled high productivity and wealth creation. This economic strength enabled the build-up of unmatched military capabilities, culminating in WWII victory and influence over the post-war order. The Bretton Woods Agreement[7] further entrenched the U.S. dollar as the world’s reserve currency, maintaining dominance for nearly 80 years.

In the past 500 years, only a handful of nations have wielded comparable economic influence, typically holding preeminence for 80–120 years before transitions occur[2]. To understand these transitions, the table below maps the key markers of dominance across past global superpowers.

02Is There a Cycle to Global Superpowers?

Simply put, history shows that the rise and fall of empires follows a predictable rhythm. Nations innovate, educate, and attract capital, fueling rapid wealth creation and global dominance. But as prosperity matures, debt builds, competitiveness wanes, and rising challengers emerge, shifting leadership to new centers of growth.

From Spain to the Netherlands, Britain, and now the United States, this rise–peak–decline cycle has repeated every 80–120 years. Understanding this pattern is key to spotting where economic power — and long-term investment opportunity — moves next.

This historical rhythm aligns closely with what Ray Dalio describes as the “Big Cycle of Empires”[2] — a repeating pattern of rise, peak, and decline that has played out over the last 500 years. These transitions rarely happen overnight. They unfold gradually, allowing global growth to continue as wealth and opportunity shift from one power to the next.

03Does the Decline of a Dominant Power Disrupt Global Markets?

History shows that while the decline of a global leader can trigger short-term geopolitical and market turbulence, it has rarely resulted in lasting global economic collapse. Instead, wealth, innovation, and influence tend to shift gradually to rising nations, enabling continued expansion of global prosperity.

The table below traces 500 years of global GDP share (PPP-adjusted)[1], illustrating how economic leadership has transitioned between major powers — not through sudden disruption, but through slow, structural rebalancing. Tipping points (`*`) mark when an emerging nation’s share matched or exceeded that of the incumbent leader (e.g., the UK overtaking the Netherlands in the 1820s, China catching up with the USA from the 2000s).

This 500-year arc of global GDP share reveals a consistent pattern: when one power wanes, another rises to take its place. And crucially, this shift is rarely disruptive to global growth. Instead, capital, trade, and innovation adapt — redirecting toward new engines of prosperity.

Four Observations

Transitions Are Evolutionary

Global power shifts play out over decades, not quarters. Britain’s influence peaked in the late 19th century but its financial clout extended well into the mid-20th. Likewise, the United States has been gradually ceding share of global GDP since the 1970s, yet still commands ~25% of global R&D[9], dominates capital markets, leads in military power, and underpins global trade with the dollar (still ~59% of global reserves)[10].

The Pie Grows — Even When the Slices Shift

In 1870, the UK accounted for ~30% of global output. By 1950, that had dropped to ~7%, but the world economy more than doubled in size, led by U.S. industrial growth. The same happened post-1970 as China’s rise offset the U.S.’ decline. Even today, while America’s share has slipped to ~18%, global GDP is at its highest ever, and innovation is accelerating.

Capital Follows the Next Frontier

Relevance Outlasts Dominance

A declining share of global GDP doesn’t erase a nation’s systemic role. The U.S. still anchors global finance, higher education, and tech innovation. Its institutions, dollar dominance, and deep capital markets will remain powerful levers for decades. But for investors seeking asymmetric alpha, the real opportunity lies at the margin — in the regions the world is just beginning to price in.

We are systematically backing businesses at the heart of India’s transformation — especially in capital goods, engineering, manufacturing, infrastructure ancillaries, and other sectors poised to disproportionately benefit as India becomes a global production and investment hub. As the world’s economic center of gravity rebalances, our job is to position ahead of the curve — through a high-conviction portfolio of 12–15 high-quality companies uniquely positioned to thrive in this evolving order.

04Can India Emerge as a Leading Global Economy?

This question is central to our long-term outlook — and our portfolio. India is often seen as a high-potential economy, but can it truly rise to global leadership? Our view: yes, but over the long arc of multiple decades. While India is unlikely to overtake the U.S. or China in total GDP within the next 30 years, it is firmly on track to become a top-three global economic force, provided it sustains its current momentum.

The Path Ahead — Ambitious, Yet Achievable

India’s current nominal GDP is approximately $4 trillion — about one-fifth the size of China ($18 trillion) and one-sixth of the U.S. ($25 trillion). To meaningfully close this gap, India must deliver sustained high growth over a multi-decade period.

Consider an aggressive but theoretically possible trajectory: if India were to grow at 10% annually for 30 years — a rate similar to China’s growth between 1978 and 2008 — its economy would expand nearly 18-fold, reaching $70 trillion by 2055. This would put India neck-and-neck with China, assuming China continues at a more mature 4–5% annual growth and ends up around $70–75 trillion by the same time.

This vision isn’t just speculative. India’s National Security Advisor, Ajit Doval, recently outlined a national goal of reaching a $32 trillion economy by 2047, marking 100 years of independence[12]. That would require an 8× expansion over 23 years, implying ~10% compound annual growth — consistent with our hypothetical model.

However, economic scale alone doesn’t guarantee global leadership. History shows us that economic transitions take time to translate into influence:

Even under the most optimistic growth scenarios, India may not emerge as the world’s largest economy within 30 years. But it can certainly enter the top three — becoming a pivotal player in global trade, manufacturing, and diplomacy, and laying the foundation for long-term global leadership in the decades that follow.

05Is India Laying the Foundation for Multi-Decade Growth?

To sustain high-single-digit GDP growth over the next 20–30 years — a feat no democracy has yet achieved — India must close its structural gaps and deepen its economic moats. At Equitree, we believe the past decade marks a critical inflection point. The country is no longer leaning solely on consumption and services. It is deliberately building the three pillars that have underpinned every modern industrial success story:

1. Infrastructure — to unlock supply-side efficiencies and cost competitiveness
2. Regulatory reform — to enable formalization and business confidence
3. Manufacturing catalysis — to expand global export share

5AInfrastructure Development

India’s ongoing infrastructure buildout is structurally transformational. With ₹111 lakh crore (~$1.5 trillion) committed under the National Infrastructure Pipeline (NIP) through FY25[20], the country is undertaking the most ambitious infrastructure investment cycle in its history. Roads, railways, ports, power, telecom, and industrial corridors are being systematically expanded to improve connectivity, reduce logistics costs, and unlock productivity.

Unlike China, South Korea, or Japan, India’s first phase of high growth was led by services and consumption — not manufacturing, the area that historically catalyzes job-rich growth. India never reached the 30–40% manufacturing-to-GDP ratios that defined the East Asian rise:

India is now working to close that gap. This shift toward industrialization is visible in the infrastructure progress made over the past decade:

Historically, no nation has industrialized without first building world-class infrastructure. From Eisenhower’s highways in the U.S. to China’s 2000s port and rail surge, physical capacity has always preceded economic takeoff. India’s past industrial ambitions were hampered by poor connectivity, unreliable power, and costly logistics. Today, those structural bottlenecks are being dismantled — with compounding effects for investors: lower logistics and energy costs improve RoIC for manufacturers and infra players, formal job creation in industrial hubs drives consumption, and export competitiveness rises as supply chains become more efficient.

5BRegulatory Reform

Infrastructure may form the physical backbone of an economy, but it’s regulatory reform that strengthens its institutional foundation. Over the past decade, India has implemented a series of structural changes aimed at simplifying compliance, reducing informality, and boosting investor confidence — critical for long-term scalability.

Between 2014 and 2020, India jumped from 142nd to 63rd in the World Bank’s Ease of Doing Business rankings[14], with major gains in starting a business, getting electricity, and securing construction permits. India now ranks 8th globally in tourism GDP contribution (WTTC, 2025)[22] — a reflection of improved infrastructure, perception, and economic formality.

At Equitree, we see formalization as a structural tailwind already visible in our portfolio. Several of our businesses in manufacturing services, apparel, consumer products, and capital equipment are gaining market share, expanding margins, and compounding returns as regulatory clarity and compliance increasingly reward transparency.

5CManufacturing Push

India’s next big leap will not come from consumption or services alone — it must be built on the back of a globally competitive industrial base. India leapfrogged manufacturing during its early growth phase: manufacturing-to-GDP ratios have hovered near 15–17% for decades.

Recognizing this gap, Indian policymakers have spent the past decade laying the foundation for an industrial revival. Flagship programs like Make in India and Aatmanirbhar Bharat[21] are central to this effort, aiming to reduce import dependency, build domestic capacity, and embed India deeply into global supply chains.

The cornerstone has been the Production Linked Incentive (PLI) scheme — a ₹2 lakh crore (~$24B) program launched in 2020 across 14 sectors, from electronics and pharmaceuticals to auto components and solar[15]. Unlike past subsidy programs, PLI is outcome-linked: it rewards actual incremental production, investment, and job creation. Impact so far:

At Equitree, we are structurally overweight on India’s “old economy” renaissance — across engineering, capital goods, industrial equipment, and infrastructure ancillaries. These sectors offer multi-decade structural tailwinds, predictable earnings engines, and significant operating leverage, making them ideal compounders for long-term capital.

These businesses are strategically positioned to benefit from the trifecta of cost competitiveness, domestic capex revival, and global supply chain diversification. As fund managers, we view the momentum in infrastructure, regulation, and industrial policy not as temporary boosts, but as the foundation of a structural economic shift.

06Market Outlook and Key Updates

Global uncertainty has risen following US President Donald Trump’s announcement of a 25% tariff on Indian goods effective August 1, 2025[25][26], alongside a penalty tied to India’s trade with Russia and BRICS involvement[27]. While India’s direct export exposure to the U.S. is modest, this move could weigh on sentiment and raise the risk premium for export-facing sectors. That said, India’s diversified export mix and strong domestic demand should help absorb the impact.

Despite near-term volatility, we continue to see meaningful bottom-up opportunities. While valuations appear stretched in certain segments, more than 30% of our investable universe (₹500–5,000 Cr market cap) still trades below 20× P/E. In our view, this is a stock-picker’s market — where fundamentals and earnings delivery will drive the next leg of returns.

Equitree’s Portfolio Positioning

In line with our vision to scale thoughtfully, Equitree is steadily expanding its institutional footprint. Over the past few months, we have partnered with some of India’s most respected wealth platforms — including Avendus Wealth, Nuvama Private, Lighthouse Canton, Neo Group, Upwisery, FundsIndia, and a range of high-quality IFA networks and boutique firms across India. These relationships are built on shared long-term thinking and a commitment to putting clients first.

We are deeply grateful for the continued trust and support of our clients and partners. It sharpens our focus and reinforces our commitment to excellence. As always, we remain disciplined, humble, and fully committed to navigating every phase of the market cycle with a compounding mindset.

If you have any questions, feedback, or would like to connect, we would love to hear from you.

Sources

01

Maddison Project Database (Bolt et al., 2020). Historical GDP (PPP) Estimates, 1500–2000.

02

Ray Dalio. The Changing World Order (2021), Bridgewater Associates.

03

Kenneth Maxwell. “Potosí and Its Silver: The Beginnings of Globalization,” 2020.

04

BBC HistoryExtra (Niall Ferguson). “Why Britain Punched Above Its Weight.”

05

Encyclopaedia Britannica. Entries on the Spanish, Dutch, and British Empires.

06

Euronext Amsterdam. “History of the Amsterdam Stock Exchange” (VOC, 1602).

07

J.D. Beckworth, Hillsdale College. “Gold and Bretton Woods,” 2012.

08

Museum Rotterdam / Dalio’s Research. Trade and capital dominance of the Dutch VOC (~1600s).

09

National Science Foundation (NSF). Science & Engineering Indicators, 2020.

10

IMF COFER Database. Currency Composition of Official Foreign Exchange Reserves (Q4 2024).

11

LinkedIn (Alvin Foo) — Referenced IMF stats on U.S. share of global GDP and gold post-WWII (narrative setup).

12

Ajit Doval, NSA — “India could reach $32T GDP by 2047,” Business Today, July 2025.

13

World Bank — Logistics Performance Index 2023: India ranked 38 (from 44 in 2018).

14

World Bank — Ease of Doing Business Report 2020: India jumped from 142 (2014) to 63.

15

Government of India, Press Information Bureau (PIB) — PLI Scheme Rollout and Sectoral Impact, 2020–24.

16

Ministry of Power — Saubhagya Scheme: 100% village electrification by 2018.

17

WTO — World Trade Statistical Review (India’s textile export share: ~5–6%).

18

Controller General of Accounts (CGA) — FY24 Capex Revised Estimate and FY25 Apr–May update.

19

Counterpoint Research (2023) — India is the world’s 2nd-largest mobile phone manufacturer (~8% volume share).

20

National Infrastructure Pipeline (NIP) — ₹111 lakh crore (~$1.5T) infrastructure plan through FY25.

21

Department for Promotion of Industry and Internal Trade (DPIIT) — Make in India and Aatmanirbhar Bharat, 2014–present.

22

WTTC — India ranks 8th globally in tourism GDP contribution (2025).

23

Equitree Capital internal estimates — Sector-wise export data, CAGR, and manufacturing shares (FY25E basis).

24

OECD Stat, ADB, and RBI — Used for secondary sector GDP share comparisons across India, China, Korea, and Japan.

25

Reuters, July 31, 2025 — “Trump Says US, India Still Negotiating After 25% Tariff Threat.”

26

Bloomberg, July 31, 2025 — “Trump Hits India With 25% Tariff; Threatens More Over Russia.”

27

White House Trade Proclamation (April 2025) — Reciprocal tariff order; 90-day pause announced April 9, 2025.