The Indian economy is all set to generate exceptional growth
India’s recent economic growth is
nothing short of a perfect winning-against-all-odds script, and the world (most
of it, at least) wants India to deliver a happy ending. Organization's like the
IMF and World Bank have raved about India’s resilience amid global chaos.
So, the question is what
happened? What helped India to defy the odds and become the bright spot in a
dull global economy?
The government’s push for
better infrastructure is fueling India’s economic growth.
More roads, more flights, more
business –
Nearly doubling of our highway
network from 79,116 km in FY 13 to 1, 44,955 in FY 23.
Domestic air passengers have
risen rapidly from 11.6 cr in FY to 27 cr in FY 23
One Nation one Tax - GST truly
was a game-changer. It brought a uniform tax structure, reduced compliance,
made logistics more efficient and eliminated the cascading effects of tax
(i.e., taxing at each successive stage in the supply chain). The annual GST
Collection has gone up from 7.4 Lakh Crore to 18.10 Lakh Crore.
The digital revolution
The India stack has been one
of the greatest financial revolutions in recent history through Identity,
Payments and Data.
Simply put, using a three-layered
framework, the India stack addressed the three requirements for access to
financial services: identity (aadhaar – more than 95% of population
having it and more than 80% had Bank accounts by 2018, payment (The
second layer introduced Unified Payments Interface (UPI), a payment system
(73.50% of total digital transaction done by UPI) and data (India
Stack’s final grand act will be establishing ownership over your data. The
government will implement it through an account aggregator (AA) network. The AA
network will help individuals securely share their information from one
financial institution to another and fast-track document verifications for
loans and investments)
The path ahead
India Stack is one of the
greatest feats of the Indian economy. It has successfully brought a vast
informal economy into the formal fold. Also, the potential uses of the India
stack are limitless. Apart from financial services, it will make waves in other
areas, such as healthcare, e-commerce, etc.
The growth drivers
Here are the unique Indian growth
drivers that have and will continue to drive India’s economic growth: Between
FY13 and FY23, India’s real GDP has grown by 74 per cent. This growth was led
by the growth in private consumption (81 per cent), i.e., the amount spent by
households on goods and services. In the last 10 years, its contribution to
real GDP has averaged 57 per cent.
We are a services-led economy its
share has been increasing slowly over the years - Services, such as financial
services, information technology, trading and tourism, on average, accounted
for 62 per cent of the GDP in the last 10 years. Agriculture – 20% and
Manufacturing – 18%.
A sleeping giant
India’s manufacturing sector
had an average GDP share of only 18 per cent in the last 10 years. But, India’s
dormant manufacturing sector is about to wake from its slumber.
#Since the pandemic, the
government has tried to spur manufacturing sectors. Its latest attempt includes
the “Make in India” initiative and production-linked incentive schemes. #
Global players want to reduce their dependence on China. India’s low labour
costs, improving infrastructure, and digital transformation will help it become
a global manufacturing hub. # India has the largest youth population in the
world. A recent Deutsche Bank report posits that India will add close to 10
crore people to its labour force over the next 10 years. As a result, it will
account for 22 per cent of the global workforce growth.
So, India’s sturdy growth engine
has capable drivers. But a few more changes are brewing, which might make India
richer and greener.
A new green revolution
India’s efforts to reduce its dependence on
imports for its energy needs will boost growth and create jobs.
India’s imports of crude oil and
petroleum products have averaged about 20 per cent of its total imports in the
last 10 years. So, India must look for greener and more sustainable fuel
sources to sustain its current GDP growth. The good news is that change is
already underway.
The government has announced that
it plans to make India net carbon zero by 2070. And non-fossil fuels already account
for more than 40 per cent of its installed capacity of electricity generation.
In fact, it has overachieved its commitment made at the COP-21 Paris Summit.
The Deutsche Bank report estimates that by 2030, India is expected to add over
340 gigawatts of renewable energy capacity. It will take renewable energy
capacity to over 60 per cent of the total installed capacity.
The response from the private
sector has been equally heartening. Reliance Industries plans to invest `75,000
crore by 2035 to establish the ecosystem for various renewable energy solutions
like hydrogen, wind and solar. Adani Enterprises has announced investments for
energy transition worth $50-70 billion over the next decade. Tata Power and JSW
Energy plan to invest `75,000 crore each in the foreseeable future as well.
Also, according to a recent report by the National Resources Defense Council,
India’s renewable sector can potentially create 10 lakh jobs by 2030.
“India’s growth would not
come at the cost of the environment...”
Happy Long Term Investing
(extracts from Value Research)
