About Us Overview of Indian Economy

A. OVERVIEW OF INDIAN ECONOMY

With a population of more than 1.3 billion, India is the world’s largest democracy and the world’s third-largest economy in purchasing power parity terms. Over the past decade with the country’s integration into the global economy, accompanied by steady economic growth, India has now emerged as one of the important global player. 

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 GDP at current prices stood at USD 2.71 trillion in financial year 2021. India is the fourth-largest unicorn base in the world with over 21 unicorns collectively valued at USD 73.2 billion, as per the Hurun Global Unicorn List. By 2025, India is expected to have ~100 unicorns  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 USD 582.04 billion, as of March 12, 2021, according to data from Reserve Bank of India. (Source: IBEF, https://www.ibef.org/economy/indian-economy-overview)

In 2014, the Government of India launched an ambitious program of regulatory reforms aimed at making it easier to do business in India. India has emerged as one of the most attractive destinations not only for investments but also for doing business.

In November 2020, the Government of India announced USD 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 ~USD 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. (Source: IBEF, https://www.ibef.org/economy/indian-economy-overview)

Further information on Indian economy can be found at:

 

I. A PAVE OF INDIAN ECONOMY IN COVID TIMES

India implemented a strict lockdown approach in 2020 to curtail spreading of the coronavirus outbreak and concentrate on expanding the country’s infrastructure & health facilities. According to the Economic Survey 2020-21, the lockdown was a critical element in ‘flattening the curve’ and saving people's lives. The second phase of the COVID-19 vaccine drive started on March 1, 2021 for all people over the age of 60, as well as those aged 45 and above who have co-morbid conditions. The country administered >6.5 crore first doses (4.8% of the current population) and 1 crore second doses (0.7% of the current population). The vaccination coverage is expected to expand further with the third phase of the vaccination drive (started on April 1, 2021) including individuals aged 45+. On April 1, 2021, India set a record for vaccination coverage by achieving the highest single-day figure of >36.7 lakh vaccinations in 24 hours.

India also provided 6.4 crore vaccine doses to 84 countries through various modalities including grants in aid, gifts, commercially and through the WHO-GAVI COVAX collaboration, as of April 2, 2021. India's vaccine strategy comes at a time when the global community is alarmed about ‘vaccine nationalism’ and the supply is inadequate.

In April-December 2020, India registered a current account surplus of USD 32.4 billion (1.7% of the GDP). 

India has been well equipped to tackle any risk exposure raised by the recent increase in COVID-19 reports as the vaccination campaign continues to scale up in India, driven by best practices from the country's effective management of the pandemic in its first wave. With the end of a challenging FY21, India looks forward to a stronger and more self-sufficient FY22.

(Source: IBEF, https://www.ibef.org/economy/monthly-economic-report)

        II. MACRO INDICATORS

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.

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.

(Source: IBEF, India Brand Equity Foundation, www.ibef.org)

About one million people joining India’s workforce every month and with one of the highest number of scientists and engineers, India is a key political, social and economic player.

 

Key Economic Indicators for India

Sources: IBEF (https://www.ibef.org/economy/monthly-economic-report) and (https://www.ibef.org/economy/indian-economy-overview)

IMF, (https://www.imf.org/en/Countries/IND)

Forecast of economic indicators for India:

  • India aims to build USD 5 trillion economy by 2024.     
  • Annual consumer spending is expected to rise from about USD 1.5 trillion currently to USD 6 trillion by 2030.
  • India has nearly doubled the share of renewables in total energy generation over the past five years, and its renewable capacity is expected to double by 2022, thanks primarily to solar and wind.

 

Source: WEF, https://www.weforum.org/agenda/archive/india/

III. Foreign Direct Investments (FDI)

Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges like tax exemptions, etc. For a country where foreign investment is being made, it also means achieving technical know-how and generating employment. The Indian Government’s favourable policy regime and robust business environment has ensured that foreign capital keeps flowing into the country. The Government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others. (Source: IBEF, https://www.ibef.org/economy/foreign-direct-investment.aspx)

Foreign Direct Investment (FDI) in India for the financial year 2020-21:

  • Highest ever total FDI inflow of USD 81.72 billion and it is 10% higher as compared to the last financial year 2019-20 (USD 74.39 billion).
  • FDI equity inflow grew by 19% (USD 59.64 billion) compared to the previous year financial year 2019-20 (USD 49.98 billion).
  • Computer software and hardware’ has emerged as the top sector with around 44% share of the total FDI Equity inflow.
  • The major sectors, namely construction, activities, computer software and hardware, rubber goods, retail trading, drugs and pharmaceuticas and electrical equipment have recorded more than 100% jump in equity compared to the previous year.

Full report is available here: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1721268

FDI equity inflows in India stood at US$ 51.47 billion in 2020-21 (between April 2020 and December 2020). Data for 2020-21 indicates that the computer software and hardware sector attracted the highest FDI equity inflows of US$ 24.39 billion, followed by the construction (infrastructure) activities (US$ 7.15 billion), service sector (US$ 3.86 billion) and trading (US$ 2.14 billion). (Source: IBEF, https://www.ibef.org/economy/foreign-direct-investment.aspx)

In 2020-21 (between April 2020 and December 2020), India received the highest FDI equity inflows from Singapore (US$ 15.72 billion), followed by the US (US$ 12.83 billion), the UAE (US$ 3.92 billion), Mauritius (US$ 3.48 billion), Cayman Islands (US$ 2.53 billion), the Netherlands (US$ 2.44 billion) and the UK (US$ 1.83 billion). (Source: IBEF, https://www.ibef.org/economy/foreign-direct-investment.aspx)

In terms of attractiveness, investors ranked India #3; ~80% investors have plans to invest in India in the next 2-3 years, while ~25% reported investments worth >US$ 500 million, the Economic Times reported. (Source: IBEF, https://www.ibef.org/economy/foreign-direct-investment.aspx)

World Bank Doing Business 2020 main key points on India:

  • India has made a substantial leap upward, raising its ease of doing business, currently holding 63 rank.
  • Remarkable reform efforts and joins the list of 10 economies that improved the most, for the third year in a row.
  • Focus on attracting foreign investment, boosting the private sector and enhancing the country’s overall competitiveness.
  • The administration’s reform efforts targeted all of the areas, with a focus on paying taxes, trading across borders, and resolving insolvency.
  • Full report: https://www.doingbusiness.org/en/data/exploreeconomies/india

 

Additional information can be found at the following links:

  1. Invest in India, National Investment Promotion & Facilitation Agency, https://www.investindia.gov.in/
  2. FDI policy and rules, https://dipp.gov.in/Policies-rules-and-acts/policies/foreign-direct-investment-policy
  3. FAQs for foreign investment in India, https://www.rbi.org.in/scripts/FAQView.aspx?Id=26
  4. Special Economic Zones in India, http://www.sezindia.nic.in/
  5. Special Economic Zones Act & Rules, http://www.epces.in/updated-sez-act-rules.php

 

B. INVEST IN INDIA

India is one of the world's fastest-growing economies, with largest youth population in the world, and world-class infrastructure across the country.

In 2019 India is ranked 68 on the list of most competitive economies in the world (Source: WEF, https://www.weforum.org/agenda/archive/india/).

Sectors in India:

More information about all sectors of interest for Slovenian companies could be reached at https://www.investindia.gov.in/sectors

The limit on foreign investments in Indian insurance companies has been increased from 49% to 74%, as stated in the Union Budget. The act would enable foreign insurance firms to take a more strategic and long-term approach to India's insurance market, bringing in more long-term resources, global technology, processes and international best practises.

In December 2020, changes in the guidelines for the provision of Direct-to-Home (DTH) services have been approved by the Union Cabinet, enabling 100% FDI in the DTH broadcasting services market. (Source: IBEF, https://www.ibef.org/economy/monthly-economic-report)

  1. Make in India

Make in India is an initiative which was launched on September 25, 2014, to facilitate investment, foster innovation, building best in class infrastructure, and making India a hub for manufacturing, design, and innovation. The development of a robust manufacturing sector continues to be a key priority of the Indian Government. It was one of the first 'Vocal for Local' initiatives that exposed India's manufacturing domain to the world. The sector has the potential to not only take economic growth to a higher trajectory but also to provide employment to a large pool of our young labour force. (Source: https://pib.gov.in/Pressreleaseshare.aspx?PRID=1703787)

The focus of Make in India programme is on 25 sectors. These include: automobiles, automobile components, aviation, biotechnology, chemicals, construction, defence manufacturing electrical machinery, electronic systems, food processing, IT & BPM, leather, media and entertainment, mining, oil and gas, pharmaceuticals, ports and shipping, railways, renewable energy, roads and highways, space, textile and garments, thermal power, tourism and hospitality and wellness. (Source: IBEF, https://www.ibef.org/economy/make-in-india)

Recently, Government has taken various steps in addition to ongoing schemes to boost domestic and foreign investments in India. These include the National Infrastructure Pipeline, Reduction in Corporate Tax, easing liquidity problems of NBFCs and Banks, policy measures to boost domestic manufacturing.

(Source: https://pib.gov.in/Pressreleaseshare.aspx?PRID=1703787)

More information at https://www.makeinindia.com