India is breaking down barriers to economic growth and emerging as a major pole in an increasingly multipolar world as global capital flows shift, trade divisions deepen and artificial intelligence reshapes industries, according to a Bloomberg Economics report released on Monday.

The report highlights how changing investment patterns, geopolitical tensions and rapid advances in AI are creating new opportunities and challenges for India and the global economy.

The AI revolution continues to gather pace, a growing number of free-trade agreements are opening new export opportunities, and urbanisation is accelerating across India. Against this backdrop, India is strengthening its position in the global economic landscape, said Tom Orlik, chief economist at Bloomberg Economics.

The report estimates that India’s expanding network of free-trade agreements could add $140 billion to $170 billion to its gross domestic product (GDP) by 2035.

Domestic reforms aimed at reducing manufacturing costs and shifting agricultural labour towards more productive sectors could further increase the economic benefits of these trade agreements, the report added.

Global capital flows are also becoming more concentrated and increasingly influenced by geopolitical considerations. According to the report, investment flows between rival nations have fallen around 40 per cent below those between allied countries. Investors are also directing more capital towards artificial intelligence and semiconductor industries.

For India, sustaining economic momentum will require the country to compete with the United States for global investment, particularly as strong demand from the US technology sector and tariff incentives attract capital.

Artificial intelligence could increase India’s annual GDP growth by up to 0.9 percentage points, providing additional momentum towards Prime Minister Narendra Modi’s goal of transforming India into a developed economy by 2047, the report said.

However, infrastructure limitations could prevent the country from fully realising these gains. India’s information technology services industry faces both significant opportunities and potential disruption as AI adoption expands.

While AI could help Indian IT companies move up the value chain by offering more advanced and specialised services, automation could also weaken the cost advantages that have traditionally supported the sector’s growth.

The report also highlighted the economic potential of India’s rapidly expanding urban population. It estimates that 820 million Indians live in urban areas, making urban development a critical factor in the country’s future productivity growth.

Strengthening municipal governance, improving infrastructure and adopting more effective land-use planning could help India convert its growing urban population into a powerful driver of economic expansion, the report noted.

India’s ability to capitalise on these opportunities will depend on how effectively it combines trade expansion, domestic reforms, technological adoption and infrastructure development amid a changing global economic environment.