India and Central Asia: A Structural Dilemma in the Pursuit of Developed status

India and Central Asia: A Structural Dilemma in the Pursuit of Developed status

Asia has been one of the principal engines of the global economy over the past two decades. Within this broader trajectory, India and Central Asia have demonstrated remarkably similar growth patterns, maintaining average annual GDP growth rates of 6–7% during this period. India’s economy expanded by 6.5% in fiscal year 2024–25, reaching INR 187.97 trillion at constant prices, while Central Asia is projected by the European Bank for Reconstruction and Development to grow by 5.7% in 2025 — a pace that even China is increasingly struggling to match. These figures create an image of dynamism-urbanization picking up, remittances pouring in, FDI trickling in. However, there is a deep-rooted structural dilemma lurking beneath: systemic underinvestment in knowledge-intensive sectors, catastrophically low R&D spending and an unremitting brain drain that bleeds away its most valuable asset- human capital. [1]

The two regions boast of demographic dividends: the median age of the population in India is 28 and the population in the Central Asia is young, promising decades of productivity. India is mainly producing services, whereas Central Asia has been exploiting its hydrocarbons and mining industries. And this is a cover of weakness. R&D expenditure remains crisis levels-India has a paltry 0.64% of GDP, with the contribution of the private sector being under 40% of that amount; leaders of the Central Asian region such as Kazakhstan spend a paltry 0.16% of GDP, despite an increase in science budgets in recent years by up to 430 million USD. These figures place them in the traps of low value: textiles and assembly in India, raw exports in Central Asia. [2]

Brain Drain Vortex

This deficiency is increased by talent flight. In 2024, more than 600,000 citizens in India emigrated, a figure that has risen to 200,000+ renouncing passports annually since 2024 under the Modi-engineers to Silicon Valley, doctors to the UK. Central Asia is not much better: last decade, only Kazakhstan lost 366,000 skilled migrants, as the oil engineers and IT specialists seek opportunities elsewhere in Russia, Europe, or the Gulf. Push factors are numerous: oppressive labor codes that put startups out of business, crumbling city infrastructure, and clogged courtroom dockets emptying pockets. Pull factors? Lucrative visas and ecosystems in foreign lands which transform the minds of locals into foreign profit. [3]

Statistics highlight the danger. India has a ratio of patents per million an entire ten times less than that of China; the Global Innovation Index of Central Asia scores wallow in the bottom quartile. Both have FDI which is crucial in tech transfer, but is deterred by bureaucratic mazes and corruption perception. Devoid of innovation, they risk falling into the middle-income trap: diminishing returns on wage and productivity growth stalls below 5 per cent. [4]

Institutional Parallels and Perils 

Enlarge institutions with the zoom and the similarities become even stronger. The Indian labor laws which are remnants of the 1970s breed informality (90% of workforce); Central Asia must contend with post-Soviet legacies of cronyism and weak property rights. Universities spew out graduates but few researchers-India has been producing 2.5 million STEM grads each year, but retention has dropped. [5] The epitome of the stall is manufacturing. In India, despite PLI schemes, its share remains at 15% of GDP with non-oil sectors growing in an anemic manner. Knowledge sectors-AI, biotech, renewables-demand clusters like Bangalore or Astana Tech Park, but scale falters without anchored talent. [6]

Ambitious Policy Roadmap in Future

The policymakers have the keys to reversal-two irreducible changes. First, catapult R&D to 2% of GDP through incentives: 200% tax deductions on the non-military components of R&D, as in the case of Israel where VC is tripled the level of public funds. India could reserve Startup India funding on AI centers; Central Asia, through SCO or OTS, pool in green tech. The investments made by Kazakhstan in science have a potential- the economic contribution can be doubled in the case of a privatization of the requirement. [6]

Second, brain retention of architects. Liberalise labour to allow gig-flexibility, fast-track judicial digitisation, and develop 50 of the world-best universities per region, the NTU of Singapore. Diaspora politics is a winner: the OCI card in India was turned into an investor visa; in Central Asia they might introduce the program of the Return Eagle cards and grant repatriates an investor visa. Estonia’s e-residency proves digital governance slashes emigration by 20%. [6]

Regionally, synergy beckons. A Software-driven agritech solution to arid lands or batteries to EVs, by co-developing with India software expertise and Central Asia minerals, could be tied to INSTC. Multilateral banks would channel joint funds to reduce geopolitical tensions of China and Russia.

Beyond GDP: Repackaging the Miracle

The real miracles are a measure of prosperity per innovator, not per capita GDP. In order to avoid the trap, South Korea reached 4% R&D in the 1990s; Taiwan through diaspora networks. India and Central Asia, with 1.8 billion souls, is of incomparable magnitude-unless they do it now. [7] The route requires boldness: tear down fences, reward risk-taking, embrace globals. Failure, and structural dilemmas are perpetuated; success, and they produce the next vanguard of Asia. The pivot should be indicated by the clock ticks 2026.

References

[1]https://www.pib.gov.in/PressReleasePage.aspx?PRID=2132688&reg=3&lang=2

[2]https://www.businesstoday.in/economic-survey/story/indias-rd-spend-at-06-of-gdp-due-to-low-contribution-from-private-sector-economic-survey-513453-2026-01-29

[3]https://factodata.com/brain-drain-how-many-people-left-india-from-1960-to-2025/

[4]https://www.thegeostrata.com/post/india-s-lost-talent-analysing-brain-drain-and-its-impact

[5]https://www.businesstoday.in/economic-survey/story/indias-rd-spend-at-06-of-gdp-due-to-low-contribution-from-private-sector-economic-survey-513453-2026-01-29

[6]https://eastasiaforum.org/2025/12/31/central-asia-balances-growth-and-great-powers/

[7]https://www.statista.com/statistics/1102501/research-and-development-spending-share-gdp-region/

Author: Dávid Biró, Senior Advisor, Research and Academic Network Lead of the Ludovika Center for Turkic Studies

Image resource: specialeurasia.com