The world is finally recognizing India’s economic strength and its fast-growing market size. Going by the overall development trend, the economy is capable of growing close to 10 percent annually over the next several years. In 2023-24, the economy may reach a growth rate of seven percent. Both domestic and foreign investors seem to be ready with their business plans to take advantage of the situation. They are investing in almost all areas of production and services – from raising minerals to manufacturing intermediaries and finished products, building infrastructure, real estates and housing, making consumer products including electronics, producing drugs, chemicals and fertilizers and offering doorstep services. The business is endless. Investors are busy fixing long-term objectives. Barring unforeseen circumstances, coming decades clearly belong to India.
Unlike China’s massive export-led economic growth since the late 1990s, India’s economy is growing predominantly on rising domestic demand. The country’s imports are constantly increasing with domestic demands far outstripping supplies. Even less publicized, well-focused domestic entrepreneurs are quietly getting ready to invest big to exploit the opportunity. The meteoric rise of businessman Gautam Adani may have been much in the news in recent years, but few may have heard of businessmen of the likes of L. B. Chaurasia, who plans to invest over Rs.20,000 crore to add to his little-known Rashmi group’s steel capacity in West Bengal in the next few years. The group now produces five million tonnes of steel per annum, more than the combined production of SAIL’s Durgapur and Rourkela steel plants in the 1990s. The Rashmi group, which recently took over three coal mines in West Bengal, targets to double the steel production capacity to 10 million tonnes by 2030. Like the Rashmi group, several other medium-sized business houses are investing big in production of steel, coal, cement, thermal power and green energy.
The current high growth trend, long-term economic prospects and market stability are pushing both foreign direct investors (FDI) and foreign portfolio investors (FPI) to invest in India’s primary and secondary markets. FPI fund flows took Sensex and Nifty to record levels in December. Last October, the inflow of FDI jumped 64 percent to $8.4 billion, ignoring the global inflationary trend, interest rate hikes by central banks and a generally bleak global economic environment. According to the latest RBI data, the FDI inflows increased for three months in a row. The government is positioning India as an attractive destination for companies from the US, Europe, and Japan, looking to expand their manufacturing bases outside China. Increasing domestic demand and high consumer confidence form the biggest strength of India’s economy.
Last month, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) noted that for the second year in a row, India was the highest recipient of FDI ($68 billion) driven by greenfield investments. “India has seen several mega deals in 2023 across sectors including communications, semiconductors, automotive OEM, software, biomass power and more from companies including NTT, Micron Technology, Hyundai, Suzuki, Microsoft and others,” ESCAP reported. Both Apple Inc of the US and Taiwanese multinational electronics contract manufacturer Foxconn are stepping up production and investment in India. The confidence of foreign investors in India is growing. The government is pushing companies such as Apple and Tesla to invest in India, offering production-linked incentives as given to domestic investors.
What makes India different from Asian tigers such as China, Japan and South Korea is its huge domestic consumption base. The country’s economy is less exposed to the export pressure as its large and growing domestic market provides the insulation, observes the World Bank. The IBRD’s latest report on the Indian economy acknowledged that India is relatively well positioned to weather global headwinds compared to most other emerging markets. “India’s economy has been remarkably resilient to the deteriorating external environment,” said World Bank country director Auguste Tano Kouame while releasing the report ‘Navigating the Storm’ earlier last month. Global ratings firm Standard & Poor’s has forecast that India’s economy will be worth $7.3 trillion by 2030. However, the IMF went a step forward projecting that India would reach that position by 2028 itself.
For several decades, global investors flocked China to set up factories even under the communist regime’s stringent export obligation rules while India’s manufacturing sector lagged. The government’s latest industrial incentives programme has ushered in a highly positive environment. Also, new opportunities are opening up for India as trade and geopolitical tensions between China and the US deepen. The US, on the contrary, is trying to build closer economic ties with India. Lately, US Treasury Secretary Janet Yellen said: “The United States is pursuing an approach called friend-shoring to diversify away from countries that present geopolitical and security risks to our supply chain. To do so we are proactively deepening economic integration with trusted trading partners like India.”
Lastly, India’s bid to internationalize its currency, Rupee, brings additional good news for both domestic and foreign investors. To a good extent, Rupee is currently accepted in Singapore, Malaysia, Indonesia, Hong Kong, Sri Lanka, the United Arab Emirates, Kuwait, Qatar and even the United Kingdom among others. Rupee is a legal tender in Nepal and Bhutan. Lately, India paid in Rupee for crude oil purchased from the UAE. The Indian Oil Corporation also made payment in Rupee for the import of one million barrels of crude oil from the Abu Dhabi National Oil Company. The trend is certainly exciting for business investors India as it will have an impact on their future export-import strategies. In due course, India is expected to be in the driver’s seat of the world economy. (IPA Service)
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