India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.
Market size
India’s GDP (at constant 2011-12
prices) was estimated at Rs. 33.14 trillion (US$ 452.74 billion) for the second
quarter of FY2020-21, against Rs. 35.84 trillion (US$ 489.62 billion) in the
second quarter of FY2019-20.
India is the fourth-largest unicorn
base in the world with over 21 unicorns collectively valued at US$ 73.2
billion, as per the Hurun Global Unicorn List. By 2025, India is expected to
have ~100 unicorns by 2025 and will create ~1.1 million direct jobs according
to the Nasscom-Zinnov report ‘Indian Tech Start-up’.
India needs to increase its rate of
employment growth and create 90 million non-farm jobs between 2023 and 2030's,
for productivity and economic growth according to McKinsey Global Institute.
Net employment rate needs to grow by 1.5% per year from 2023 to 2030 to achieve
8-8.5% GDP growth between 2023 and 2030.
India's foreign exchange reserves
stood at US$ 581.131 billion in the week up to December 18, 2020 according to
data from RBI.
Recent Developments
With an improvement in the economic
scenario, there have been investments across various sectors of the economy. In
2020, the total deal value in India stood at ~US$ 80 billion across 1,268
transactions. Of this, M&A activity contributed ~50% to the total
transaction value. Private Equity–Venture Capital (PE-VC) companies expanded
from US$ 36.3 billion (1,012 deals) in 2019 to US$ 39.2 billion (across 814
deals) in 2020. Some of the important recent developments in Indian economy are
as follows:
·
India’s overall exports from April
2020 to November 2020 were estimated at US$ 304.25 billion, (a 14.03% decrease
over the same period last year). Overall imports from April 2020 to November
2020 were estimated at US$ 290.66 billion, (a 29.96% decrease over the same
period last year).
·
According to IHS Markit, Purchasing
Managers' Index (PMI) for manufacturing stood at 56.4 in December 2020, against
56.3 in November 2020, indicating a higher growth for manufacturers speeding up
production and boosting efforts to rebuild their inventories.
·
Gross tax revenue stood at Rs. 7.21
trillion (US$ 98.50 billion) in the first six months of FY21.
·
FDI inflows in India stood at US$
39.93 billion between April 2020 and September 2020, 10% higher than the first
six months of 2019-20 (US$ 36.05 billion).
·
India’s Index of Industrial
Production (IIP) for October 2020 stood at 128.5, against 123.2 for September
2020.
·
Consumer Food Price Index (CFPI) –
combined inflation was 9.43% in November 2020, against 11.07% in October 2020.
·
Consumer Price Index (CPI) –
combined inflation was 6.93% in November 2020, against 7.61% in October 2020.
Government Initiatives
The first Union Budget of the third
decade of 21st century was presented by Minister for Finance & Corporate
Affairs, Ms Nirmala Sitharaman in the Parliament on February 1, 2020. The budget aimed at energising the Indian
economy through a combination of short-term, medium-term, and long-term
measures.
In November 2020, the Government of
India announced Rs. 2.65 lakh crore (US$ 36 billion) stimulus package to
generate job opportunities and provide liquidity support to various sectors
such as tourism, aviation, construction and housing. Also, India's cabinet
approved the production-linked incentives (PLI) scheme to provide ~Rs. 2
trillion (US$ 27 billion) over five years to create jobs and boost production
in the country.
Numerous foreign companies are setting
up their facilities in India on account of various Government initiatives like
Make in India and Digital India. Mr Narendra Modi, Prime Minister of India,
launched Make in India initiative with an aim to boost country’s manufacturing
sector and increase purchasing power of an average Indian consumer, which would
further drive demand and spur development, thus benefiting investors. The
Government of India, under its Make in India initiative, is trying to boost the
contribution made by the manufacturing sector with an aim to take it to 25% of
the GDP from the current 17%. Besides, the Government has also come up with
Digital India initiative, which focuses on three core components: creation of
digital infrastructure, delivering services digitally and to increase the
digital literacy.
Some of the recent initiatives and
developments undertaken by the Government are listed below:
On January 6, 2021, the Government
of India and New Development Bank (NDB) signed two loan agreements for US$ 646
million to upgrade the State Highway network and district road network in
Andhra Pradesh.
On January 5, 2021, the Citizen
Assistance and Relief in Emergency Situations (PM CARES) Fund Trust of the
Prime Minister allocated Rs. 201.58 crore (US$ 27.56 million) to establish 162
additional dedicated pressure swing adsorption (PSA) medical oxygen generation
plants within the country's public health facilities.
On January 5, 2021, a US$ 105
million project to develop the inland water transport system in Kolkata, West
Bengal, was signed by the Government of India, Government of West Bengal and
the World Bank.
In December 2020, the Government of
India and Asian Development Bank (ADB) signed a US$ 231 million loan to boost
electricity generation capacity in Assam through the establishment of a
hydroelectric power plant of 120 megawatts (MW) that will strengthen household
electricity availability.
In December 2020, the Government of
India and Asian Development Bank (ADB) signed a US$ 100 million loan to
modernise and upgrade the power distribution system to boost the quality and
efficiency of electricity supply in Bengaluru, Karnataka.
In December 2020, the Indian cabinet
approved assistance of ~Rs. 3,500 crore (US$ 478.60 million) for sugarcane
farmers (Ganna Kisan).
The Prime Minister of India, Shri.
Narendra Modi announced various economic packages worth ~Rs. 30 trillion (US$
410 billion), which was ~15% of India's GDP.
In December 2020, the Government of
India and New Development Bank (NDB) signed a loan agreement to lend US$ 1 billion
via the Mahatma Gandhi National Rural Employment Guarantee Scheme to support
the ‘Aatmanirbhar Bharat’ initiative.
India is expected to attract
investment of around US$ 100 billion in developing the oil and gas
infrastructure during 2019-23.
The Government of India is going to
increase public health spending to 2.5% of the GDP by 2025.
For implementation of Agriculture
Export Policy, Government approved an outlay Rs. 2.068 billion (US$ 29.59
million) for 2019, aimed at doubling farmers income by 2022.
Road Ahead
India's GDP is expected to reach US$
5 trillion by FY25 and achieve upper-middle income status on the back of
digitization, globalization, favorable demographics, and reforms.
India is also focusing on renewable
sources to generate energy. It is planning to achieve 40% of its energy from
non-fossil sources by 2030, which is currently 30%, and have plans to increase
its renewable energy capacity from to 175 gigawatt (GW) by 2022.
India is expected to be the third
largest consumer economy as its consumption may triple to US$ 4 trillion by
2025, owing to shift in consumer behavior and expenditure pattern, according to
a Boston Consulting Group (BCG) report. It is estimated to surpass USA to
become the second largest economy in terms of purchasing power parity (PPP) by
2040 as per a report by PricewaterhouseCoopers.
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