There are signs of stability and growth in the economic growth forecasts for India. This will boost the sectoral efforts and uplift the overall development of the country. The landmark ‘Make In India’ initiative completes a decade of its immense contribution to the country’s all round development efforts and highlights the progress made by the Government over the last 10 years.
Asian Development Bank – The Asian Development Bank (ADB) forecasts that India’s economic growth will remain robust, with gross domestic product (GDP) expected to increase by 7.0% in fiscal year (FY) 2024 (ending 31 March 2025) and 7.2% in FY2025. These projections are part of ADB’s Asian Development Outlook (ADO) September 2024, which was released recently. The forecasts are consistent with the ADO report from April 2024, as reported by Asia Law Portal here. “India’s economy has shown remarkable resilience in the face of global geopolitical challenges and is poised for steady growth,” said ADB Country Director for India Mio Oka. “Agricultural improvements will enhance rural spending, which will complement the effects of robust performance of the industry and services sectors.” The report highlights that an above-average monsoon in most parts of the country will lead to strong agricultural growth, enhancing the rural economy in FY2024. It maintains a positive outlook for the industry and services sectors, private investment, and urban consumption for FY2024 and FY2025. Additionally, a new government policy offering employment-linked incentives to workers and firms could increase labor demand and support job creation starting in FY2025.
The report further states that with the government’s fiscal consolidation efforts, central government debt is projected to decrease from 58.2% of GDP in FY2023 to 56.8% in FY2024. The general government deficit, which includes state governments, is expected to fall below 8% of GDP in FY2024.
Near-term growth risks include geopolitical shocks that could disrupt global supply chains and commodity prices, as well as weather-related risks to agricultural output. The outlook is based on the central government achieving its capital expenditure target in FY2024. These risks may be offset by higher foreign direct investment, which could support growth and investment, particularly in manufacturing. Additionally, improvements in the supply of agricultural products may reduce food prices, potentially lowering consumer inflation below the forecast.
World Bank India Report – TheIndian economy continues to grow at a healthy pace despite challenging global conditions, according to World Bank’s latest India Development Update: India’s Trade Opportunities in a Changing Global Context. But to reach its $1 trillion merchandise exports goal by 2030, India needs to diversify its export basket and leverage global value chains. The India Development Update (IDU) observes that India remained the fastest-growing major economy and grew at a rapid clip of 8.2 percent in FY23/24. Growth was boosted by public infrastructure investment and an upswing in household investments in real estate. On the supply side, it was supported by a buoyant manufacturing sector, which grew by 9.9 percent, and resilient services activity, which compensated for underperformance in agriculture. With a narrowing of the current account deficit and strong foreign portfolio investment inflows, foreign exchange reserves reached an all-time high of $670.1 billion in early August, equivalent to over 11 months oft cover (in FY23/24 import terms). Amid challenging external conditions, the World Bank expects India’s medium-term outlook to remain positive. Growth is forecast to reach 7 percent in FY24/25 (higher than 6.4% in the Global Economic Prospects June 2024 report, covered by Asia Law Portal here) edition and remain strong in FY25/26 and FY26/27. With robust revenue growth and further fiscal consolidation, the debt-to-GDP ratio is projected to decline from 83.9 percent in FY23/24 to 82 percent by FY26/27. the current account deficit is expected to remain at around 1-1.6 percent of GDP up to FY26/27.
The IDU also highlights the critical role of trade for boosting growth. The global trade landscape has witnessed increased protectionism in recent years. The post pandemic reconfiguration of global value chains, triggered by the pandemic, has created opportunities for India. The report emphasizes that India has boosted its competitiveness through the National Logistics Policy and digital initiatives that are reducing trade costs. However, it also notes that tariff and non-tariff barriers have increased and could limit the potential for trade focused investments.
A Decade of Make In India – The ‘Make in India’ initiative, launched on 25th September 2014, completes a landmark decade of empowering India to become a global manufacturing hub. Under the visionary leadership of Prime Minister Shri Narendra Modi, the program has played a pivotal role in boosting domestic manufacturing, fostering innovation, enhancing skill development, and facilitating foreign investment. Here is the 10 Years of Impact:
- Foreign Direct Investment (FDI): Since 2014, India has attracted a cumulative FDI inflow of USD 667.4 billion (2014-24), registering an increase of 119% over the preceding decade (2004-14). This investment inflow spans 31 States and 57 sectors, driving growth across diverse industries. Most sectors, except certain strategically important sectors, are open for 100% FDI under the automatic route. FDI equity inflows into the manufacturing sector over the past decade (2014-24) reached USD 165.1 billion, marking a 69% increase compared to the previous decade (2004 -14), which saw inflows of USD 97.7 billion.
- Production Linked Incentive (PLI) Scheme: The PLI Schemes introduced in 2020 have resulted in ₹1.32 lakh crore (USD 16 billion) in investments and a significant boost in manufacturing output of ₹10.90 lakh crore (USD 130 billion) as of June 2024. Over 8.5 lakh jobs have been created directly and indirectly due to the initiative.
- Exports & Employment: India’s merchandise exports surpassed USD 437 billion in FY 2023-24. Exports have surged, with an additional ₹4 lakh crore generated due to the PLI schemes, while total employment in the manufacturing sector increased from 57 million in 2017-18 to 64.4 million in 2022-23.
- Ease of Doing Business: India’s commitment to improving business conditions is evident in its sharp rise from 142nd rank in 2014 to 63rd rank in 2019 in the World Bank’s Doing Business Report. Over 42,000 compliances have been reduced, and 3,700 provisions has been decriminalized. The Jan Vishwas (Amendment of Provisions) Act, 2023, passed by Lok Sabha on 27th July 2023 and Rajya Sabha on 2nd August 2023, which has decriminalized 183 provisions across 42 Central Acts.
Foreign Portfolio Investors – Foreign Portfolio Investors (FPIs) have been net buyers of Indian equities at Rs 57,359 crore. The total investments by them now stand at Rs 1,00,245 crore on the year-to-date basis and is highest in nine months.
