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28th October 2021

India’s Emergence In the Global Economic Landscape

Over time, India has made a paradigm shift towards success as it has emerged as the fastest-growing economy. It has been crowned the title of attractive investment destination driven by economic reforms. India’s GDP at current prices stood at 51.23 lakh crore (US$ 694.93 billion) in the first quarter of FY22, as per the provisional estimates of gross domestic product for the first quarter of 2021-22.

India’s infrastructure is the most important factor in economic development and is driving the economy on a progressive path. Accelerating the pace of economic development the most promising infrastructures are: energy, transport, irrigation, finance, communication, education, and health. The first five refer to economic infrastructural facilities, while the latter two relate to social infrastructure.

Additionally, India’s banking system houses 20 public sector banks, 22 private sector banks, 44 foreign banks, 44 regional rural banks, 1,542 urban cooperative banks and 94,384 rural cooperative banks in addition to cooperative credit institutions. The ATM’s in India have surged as it has increased from 2.35 lakh to 2.39 lakh ATMs in March 2020. According to the Reserve Bank of India, in June 2021, the total debit cards in circulation stood at 906 million, while credit cards in circulation stood at 62 million.

Recent Developments/Investments

  • India’s merchandise exports between April 2021 and August 2021 were estimated at US$ 164.10 billion (a 67.33% YoY increase). Merchandise imports between April 2021 and August 2021 were estimated at US$ 219.63 billion (an 80.89% YoY growth).
  • As of August 27, 2021, foreign exchange reserves in India increased to US$ 633.5 billion.
  • The private equity-venture capital (PE-VC) sector recorded investments worth US$ 10.7 billion across 137 deals in August 2021, registering a 5x YoY growth.
  • Foreign portfolio investors (FPIs) invested US$ 2.5 billion in India in August 2021.
  • The gross GST (Goods and Services Tax) revenue collection stood at Rs. 112,020 crore (US$ 15.21 billion) in August 2021.
  • In the first half of 2021, ~344 M&A deals worth US$ 21.6 billion were signed/concluded.
  • In September 2021, Union Minister for Commerce & Industry, Textiles, Consumer Affairs & Public Distribution, Mr Piyush Goyal launched a ‘National Single Window System’ to provide a more enhanced and efficient service and experience for businesses and investors.
  • In September 2021, Union Cabinet approved an FDI proposal of Anchorage Infrastructure Investment Holding Ltd., for a proposed investment worth Rs. 15,000 crore (US$ 2.04 billion) in India.
  • In June 2021, Finance Minister, Ms Nirmala Sitharaman, announced relief funds worth Rs. 628,993 crore (US$ 84.73 billion) to support economic recovery.

Key highlights are as follows:

    1. The government announced an additional Rs. 1.5 lakh crore funding for Emergency Credit Line Guarantee Scheme, taking the overall cap of permissible assurance to Rs. 4.5 lakh crore.
    2. To support the National Export Insurance Account (NEIA) Trust, the government announced an additional Rs. 33,000 crore for project exports over the next five years through the Exim Bank of India.
    3. The government announced to extend the production-linked incentive (PLI) scheme for mobile phones by one year until FY26, lending a boost to mobile phone manufacturers including domestic players such as Micromax, Dixon and Lava and iPhone manufacturers such as Foxconn and Wistron.
    4. In June 2021, Finance Minister, Ms Nirmala Sitharaman, announced an additional outlay of Rs. 19,000 crore (US$ 2.56 billion) for the BharatNet project—to expand broadband penetration in rural areas through the PPP model and boost the ‘Digital India’ initiative.
  • In June 2021, Defence Minister, Mr Rajnath Singh, invited Swedish companies to invest in defence corridors in Tamil Nadu and Uttar Pradesh.
  • In June 2021, Mr Mukesh Ambani, Chairman, Reliance Industries Ltd., announced that the company (Reliance) plans to invest Rs. 750 billion (US$ 10.10 billion) in a new energy business over the next three years.
  • In May 2021, the Government of India signed a finance agreement with the European Investment Bank for the second tranche of EUR 150 million (US$ 178.58 million) for the Pune Metro Rail project.

The country is scaling heights and is expected to become a US$ 5 trillion economy by 2030. As per the estimates of the Government of India, the country will need an investment of US$ 4.5 trillion to build sustainable infrastructure by 2040.

Source : IBEF

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