Emerging Market INDIA

The India Story

India has come a long way from being known as the land of snake charmersto recent accolades for its MarsOrbiter Mission and record-breaking satellite launches.

The seven-decade journey since its independence has changed India’s socio-economic fabric. Once seen as a country destined to struggle with social and economic issues such as poverty, illiteracy, poor infrastructure, and weak financial parameters from the impact of partition, India’s gradual progress towardsbuilding a stronger economy and nation has begun. Today, India’s $2 trillion economy is the seventh largest in the world and among the fastest growing.

India is now appropriately tagged as a bright spot amid a weak global economic scenario. The Indian economy grew at 7.6% in 2015 against the backdrop of the world economy’s 3.2% growth.It slowed a bit in 2016 primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent demonetization initiative. Nevertheless, India’s economy is expected to bounce back up to 7.2% in 2017 followed by 7.7% in 2018, per IMF, while the world economy is expected to continue to hold around 3.4% for the same periods.

India presentsan ideal combination of a healthy growth rate, contained inflation, stable macroeconomic variables, and ample opportunities givenby its resources and demographics. One crucial factor highlighting India in recent years is the great improvement in macro-economic resilience which shows the strength of its economy and boosts investor confidence.

improvement_mapAnother area that highlights India is its classification as a young nation. Although the world’s population is rising, the percentage of the world’s workingpopulation is on the decline and will reach approximately 7.72 billion by 2020. India again stands out with 50% of its population under the age of 25 and 65% below 35 years of age. By 2030 it is expected that India will reach a point to benefit from its demographic dividend wherethe majority of its people will be in a working age group with fewer children and elderly as a percentage of its population. To realize the true potential of this demographic advantage, programs such as the National Skill Development Mission have been initiated by the Indian government.

In addition, the Modi-led government is helping transform the India industry and economic outlook.  To date, the government has initiated more than 30 big reforms since it came to power – some of which have been completed or are in progress while others remain in the pipeline.

By opening-up its economy and making ‘doing business’ as well as ‘investing’ in India easier, primarily by cutting down on lengthy procedures and formalities to get regulatory approvals and licensing,India improved its rankingin the 2016 World Bank’s ‘doing of business index’ from 134th to 130th. What iseven more significant is India’s improvement on two key scores – starting a business and getting electricity connection. A 2014 report by PwC suggests that progress on these and various other parameters of the index “could improve India’s rank in this index by more than 50 in just a few years.”

Further evidence of India’s progress is demonstrated in the data released by the Department of Industrial Policy and Promotion (DIPP), showing Foreign Direct Investment (FDI) inflows into India in 2016 reached $46.4 billion, an increase of 18% year-on-year. “Make in India is opening investment doors. The most striking indicator of progress is the unprecedented opening up of key sectors – including Railways, Defence, Insurance and Medical Devices – to dramatically higher levels of Foreign Direct Investment.”Make in India’s efforts to rebuild the structure of its economy with a focus on digitalization translates into more revenue for the government’s exchequer while boosting India’s economic growth and appeal as an investment destination.

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GROWTH CREATES OPPORTUNITIES
  • India became a Trillion Dollar Economy (12th largest country by GDP) in FY2008
  • The economy is expected to add another Trillion Dollars to annual output in 8 Years i.e. 2016
  • That is likely to make India the 8’th largest economy in the world
  • This is a structural transformation driven by increasing investments, growing consumption and a young and dynamic workforce
  • For equity investors : an attractive investment opportunity
India Wave graphic