INDIA'S
GROWING ECONOMY
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.
India’s real gross domestic product (GDP) at
current prices stood at Rs. 195.86 lakh crore (US$ 2.71 trillion) in FY21, as
per the second advance estimates (SAE) for 2020-21.
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$ 582.04 billion, as of March 12, 2021, 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) sector recorded investments worth US$
47.6 billion across 921 deals in 2020. Some of the important recent
developments in Indian economy are as follows:
● India’s
overall exports from April 2020 to February 2021 were estimated at US$ 439.64
billion, (a 10.14% decrease over the same period last year). Overall imports
from April 2020 to February 2021 were estimated at US$ 447.44 billion (a 20.83%
decrease over the same period last year).
● According
to IHS Markit, Purchasing Managers' Index (PMI) for manufacturing stood at 57.5
in February 2021.
● Gross
tax revenue stood at Rs. 113,143 crore (US$ 15.58 billion) in February 2021, up
from Rs. 105,361 crore (US$ 14.51 billion).
● Cumulative
FDI equity inflows in India stood at US$ 749.39 billion between April 2000 and
December 2020.
● India’s
Index of Industrial Production (IIP) for January 2021 stood at 135.2, against
136.6 for December 2020.
● Consumer
Food Price Index (CFPI) – combined inflation was 3.87% in February 2021,
against 1.96% in January 2021.
● Consumer
Price Index (CPI) – combined inflation was 5.03% in February 2021, against
4.06% in January 2021.
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 the
Union Budget 2021-22, capital expenditure for FY22 is likely to increase to
increase by 34.5% at Rs. 5.5 lakh crore (US$ 75.81 billion) over FY21 (BE) to
boost the economy.
● Increased
government expenditure is expected to attract private investments, with
production-linked incentive scheme providing excellent opportunities. Consistently
proactive, graded and measured policy support is anticipated to boost the
Indian economy.
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:
● In
March 2021, Flipkart announced plans to expand its grocery services to >70
cities in the next six months. As a result of this planned expansion, customers
in seven key cities and >40 neighbouring cities will be able to access
high-quality grocery items, deals, fast deliveries and a seamless shopping
experience.
● In
February 2021, Amazon India announced to start manufacturing of electronics
products in India. The company plans to commence its manufacturing efforts with
its contract manufacturer, Cloud Network Technology, a subsidiary of Foxconn in
Chennai, and start production in 2021.
● In
March 2021, India and Kuwait decided to establish a joint ministerial
commission to strengthen ties in sectors such as energy, trade, investment,
manpower & labour and IT. According to a joint statement, the commission
will be focused on developing the best platform to strengthen alliance in areas
of energy, trade, economy, investment, human resources, manpower and labour,
finance, culture, information technology, health, education, defence and
security.
● In
March 2021, the parliament approved a bill to increase foreign direct
investments (FDIs) in the insurance sector from 49% to 74%. Union Minister for
Finance and Corporate Affairs, Ms. Nirmala Sitharaman, who is piloting the
Bill, stated that increasing the FDI limit in the insurance sector will support
insurers in boosting additional funds and overcoming financial issues.
● In March 2021, the parliament passed the ‘National Commission for Allied, Healthcare Professions Bill, 2021’. Union Minister for Health and Family Welfare, Science and Technology and Earth Sciences, Mr. Harsh Vardhan stated that the law aims to meet the sector's long-standing demands and increase professional employment opportunities.
India recorded the real GDP (gross domestic product) growth of 0.4% in the third quarter of FY21, as per the NSO's (National Statistical Office) second advance estimates. This rise indicates V-shaped recovery progression that started in the second quarter of FY21.
As per Economic Survey 2020-21, India's real
GDP growth for FY22 is projected at 11%. The January 2021 WEO update forecast a
11.5% increase in FY22 and a 6.8% rise in FY23. According to the IMF, in the
next two years, India is also expected to emerge as the fastest-growing
economy.
India is 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 behaviour 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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