How India Can Become The Fastest Growing Economy in Asia

History

India has developed as the world's fastest growing major economy, and it is predictable to be one of the top three financial powers in the next 10-15 years, owing to its robust democracy and strong partnerships. India ranks 145th and 122nd in terms of GDP per capita. Since the turn of the century, annual average GDP growth has ranged between 6% and 7%, and from 2013 to 2018, India was the world's fastest growing significant economy, outperforming China. Historically, India was the biggest economy on the planet for the vast majority of the two centuries from the first until the nineteenth century .India is gaining traction, fueled by a recovery in industrial output and growth in core sectors, as well as relatively focused government initiatives and policies. While the economy is reviving as a result of the fading effects of the third wave and a rapid vaccination drive, some of the most distressed sectors are gradually gaining momentum. Amid Covid-19 ,recent high frequency indicators are indicating a positive trend and boosting both business and consumer confidence. Rail and flight activity, passenger traffic, power consumption, e-way bills, and Goods and Services Tax (GST) collections are all on the rise. The Indian economy's long-term development prospects stay behind positive due to its young population and low dependency ratio, healthy savings and investment rates, rising globalisation in India and integration into the global economy.

Market Size

As demand recovers and industrial indices improve, financial institutions in India are experiencing a surge of optimism. The Reserve Bank of India (RBI) and the International Monetary Fund (IMF) both forecast 9.5 percent GDP growth for India in fiscal year 22. Foreign investors are also optimistic about the economy, as evidenced by a 23 percent increase in FDI inflows in 1Q22 versus 4Q20. According to the Hurun Global Unicorn List, India has the fourth-largest unicorn population in the world, with over 21 unicorns worth a total of $73.2 billion. According to the Nasscom-Zinnov report 'Indian Tech Start-up,' India is expected to have 100 unicorns by 2025, with 1.1 million direct jobs created. In a nutshell, the Indian economy is likely to recover, aided by industrial resurgence, increased demand, and policy intervention. However, a growing trade deficit, inflationary pressures, and scepticism about the third wave of COVID-19 could slow the recovery.

Recent Investments in Keys Sectors

Prior to the pandemic, data from the World Bank showed that India's gross fixed capital formation (investment) rate had fallen from 36% in 2007 to 27% in 2019. The vulnerability of India's financial sector, combined with poor export performance and delays in privately funded projects, slowed investment in the decade preceding Covid-19. These challenges have been exacerbated by the ongoing disruption to the Indian economy, further reducing consumption, investment, and exports. Sanjana Kadyan, Deputy Director (Ministry of Finance) at the Government of India, stated that "prior to the pandemic, India had taken a string of measures to boost investment, including the introduction of the GST, the Insolvency and Bankruptcy Code, banking sector reforms, and the Make in India programme.” But now in August 2021, the private equity - venture capital sector recorded investments totaling US$ 10.7 billion across 137 transactions, representing a 5x year-on-year increase with india economy gradually emerging from the shadow cast by the pandemic and showing signs of a steady recovery, pent-up demand will most likely sustain the growth momentum.

Expectations From The Union Budget 2022-2023

Capital expenditure for FY22 is expected to rise 34.5 percent to Rs. 5.5 lakh crore (US$ 75.81 billion) in the Union Budget 2022. Ms. Nirmala Sitharaman, Minister of Finance and Corporate Affairs, delivered the Union Budget in the Parliament on February 1, 2022. The budget aimed to energise the Indian economy through a combination of short-, medium-, and long-term measures. Increased government spending is expected to attract private investment, with the production-linked incentive scheme providing excellent opportunities where the Indian economy is expected to benefit from consistent proactive, graded, and measured policy support. The ecosystem around job, income, and demand creation is also being prioritised. India is a domestic demand–driven economy that requires sustained demand growth to achieve a strong recovery. This will necessitate an increase in the number of jobs and employment opportunities in order to fatten consumers' wallets. Because micro, small, and medium-sized enterprises (MSMEs) are the largest job creators in India, the government is also identifying their pain points and devise a solution to help them become a part of "Aatmanirbhar Bharat." Furthermore, the government of india is prioritizing MSMEs through targeted credit support.

Digital Transformation Towards a New India

The current digital transformation of India is expected to accelerate the growth of e-commerce, changing the retail consumer market scene over the next decade. According to the report, "this is attracting leading global multinationals in technology and e-commerce to the Indian market." "By 2030, 1.1 billion Indians will have access to the internet, more than doubling the estimated 500 million internet users in 2020." The rapid development of e-commerce, as well as the transition to 4G and 5G smartphone technology, had provided benefits to the home-grown unicorns such as online e-commerce platform Mensa Brands, logistics start-up Delhivery, and the fast-growing online grocer BigBasket, whose e-sales have increased during the pandemic. Digital Transformation has helped India's GDP to rise from USD 2.7 trillion in 2021 to USD 8.4 trillion by 2030 .This rapid pace of economic development would result in the size of Indian GDP beyond Japanese GDP by 2030, making India the second-largest economy in the Asia-Pacific region."

Road Towards Becoming Asia’s Number One

In the first quarter of FY22, India's actual gross value increased by 18.8 percent, regaining 92 percent of its pre-pandemic level (in the first quarter of FY20). The government's ongoing efforts to increase vaccination coverage among citizens are propelling the economic recovery forward, and the outlook for further reviving industrial activity is encouraging. However, a number of key growth drivers are supporting the long-term outlook of the Indian economy, and India is expected to remain one of the world's fastest-growing economies in the coming decade surpassing Japan , France and UK.