Navigating the economic landscape: India’s growth trajectory amidst key risks
Introduction:
Driven by positive global trends and timely investments in energy and technology, India is expected to overtake Germany and Japan to become the world’s third-largest economy by 2027 and hold the third-largest stock market by 2030.
India’s economy has grown at the highest rate in the world over the last ten years, with an average GDP growth rate of 5.5%. This indicates that India’s economic might has been on an impressive upward trajectory. Global offshore, digitization, and the energy boom are three disruptive factors that are coming together to provide India a once-in-a-lifetime chance to boost economic growth and enable its billion-plus population to live in greater prosperity.
By 2031, India’s GDP may have surpassed $7.5 trillion, more than doubling from its current $3.5 trillion level. India is expected to become a major player in the global economy. If India’s share of global exports doubles, it would mean that the country is exporting twice as many goods as it is today. This would be a major boost for India’s economy, and it would create many new jobs for Indian workers. In the upcoming years, the market value of the Bombay Stock Exchange could reach $10 trillion, with an expected 11% annual growth. This would be a major development for India’s financial sector, and it would make the country a more attractive destination for foreign investment.
Boosting India’s production share in global markets:
India has the potential to become a global manufacturing powerhouse. The country has a large pool of young, talented workers, and it is making significant investments in infrastructure and education. As a result, India is becoming increasingly attractive to multinational companies looking to set up manufacturing operations. This could lead to a significant boost in India’s share of global manufacturing exports.
Increasing credit availability: In recent years, India has made tremendous success in increasing credit availability, and this trend is projected to continue. This will make borrowing money easier for businesses, resulting in higher investment and job growth.
Starting a new business: India is a hive of entrepreneurial activity, and this trend is likely to continue in the coming years.
Improving Life Quality: The quality of life for Indians is predicted to increase as the country’s economy grows.
Driving a boom in consumer spending: Indian consumers are anticipated to spend more money as their standard of living improves. This will increase demand for products and services, hence stimulating economic growth.
India is expected to experience significant economic growth in the coming years, with an annual output growth of over $400 billion from 2023 onwards. This growth will rise to over $500 billion annually after 2028, India is poised to become a global economic leader, playing a significant role in shaping the global economic landscape.
Global Offshoring Builds a Global Workforce
Companies have been outsourcing various services, including software development, customer service, and business process outsourcing (BPO), to India for many years. This trend was initially driven by India’s lower labour costs and availability of skilled professionals. However, recent factors, such as tighter global labour markets and the rise of distributed work models, are renewing interest in India as a global outsourcing destination.
India is also on route to become the world’s factory, due to corporate tax cuts, investment incentives, and infrastructure spending, which are driving capital investments in manufacturing.
The confidence of global firms in India’s investment prospects is at an all-time high. Optimism among multinational corporations (MNCs) regarding investment prospects in India’s manufacturing sector has reached an unprecedented high. These positive trends are driving projections of a substantial rise in manufacturing’s share of India’s GDP, from the current 15.6% to 21% by 2031. Simultaneously, India’s export market share is expected to double during this period, further cementing its position as a global manufacturing powerhouse. Manufacturing’s proportion of GDP in India might rise from 15.6% to 21% by 2031, more than doubling India’s export market share.
Key risks to India’s economic growth:
1.Prolonged Global Recession:
The Indian economy is highly dependent on global demand for exports, and a prolonged global recession might have a severe influence on its growth prospects. If large countries such as the United States and Europe face a lengthy slump, demand for Indian goods and services may fall, resulting in decreased exports and slower economic growth.
2.Unfavourable Geopolitical Developments:
India is prone to geopolitical tensions and conflicts because of its geographical location in a politically volatile region. Instability and violence in a region can disrupt trade, raise security concerns, and discourage foreign investment. These elements have the potential to destroy the Indian economy, making it more difficult for businesses to plan and invest.
3.Domestic Policy Fluctuations:
Domestic policy changes in India, such as taxation, labour legislation, and environmental restrictions, can have a substantial impact on the investment climate and business environment. Unpredictable or unfavourable policy changes can discourage foreign investment and make commercial operations onerous, stifling economic progress.
4.Lack of Skilled Labor:
India’s rapid economic expansion has resulted in an increase in the demand for skilled labour, but the country’s education system is not yet completely prepared to meet this demand. This skilled labour shortage can limit the growth of some industries and make it difficult for firms to find the expertise they need to compete globally.
5.Energy Shortages:
India is a net energy importer, and rising global energy prices could put a pressure on the country’s economy. Energy scarcity can also cause power outages and disruptions in industrial production, weighing on economic growth.
6.Commodity Volatility:
The Indian economy is subject to commodity price movements, particularly oil prices. Rising oil prices can raise India’s import bill and add to inflationary pressures. Commodity volatility can also make it difficult for firms to plan ahead of time.
