The recessionary headwinds blowing worldwide may impact some of India’s potential. Still, according to the latest estimates put out by the Economic Survey, our economy has already exhibited a robust growth rate of 7% in FY 22–23. According to the IMF, it is expected to grow at nearly 6% in FY 24. On their own, the numbers paint a picture of slowing growth. However, if put in the right context, with global growth slowing to a crawl, the numbers underline the Indian economy’s resilience.
India’s economy has historically been good at weathering the worst of the world’s financial crises, such as the 2008 global financial crisis, the worst economic downturn since the Great Depression that decimated the world’s economy. That is because there has always been a degree of decoupling that has acted as a cushion and protected our economy against the worst resultant fallout. But decoupling alone cannot explain our economy’s current resilience. Our economic system is now more tightly interwoven with the world economic order than ever before. A big part of the reason I am optimistic about our fortunes is the strong foundation the government is laying down on which we are building our economic destiny.
Over the past ten years, besides a substantial boost to infrastructure spending, many reforms have paved the way for India’s rise. Interventions like the Jan Dhan accounts, Skill India, the implementation of GST, the digital payments network, the launch of ONDC and so on have been game changers, significantly aiding India’s capability. Key reforms like PLI, Make in India, and improvements to core infrastructure like ports and airports have also raised India’s equity and capability. Take manufacturing, for example—a commitment to local sourcing of components has become an almost universal condition for foreign businesses to be given concessions to operate here, be they Tesla, Apple or other major equipment makers. Apple is expected to manufacture a large part of its global iPhone supply in India by 2027.
India’s economy has three main levers—agriculture, manufacturing and services. These three have a share of roughly 18%, 16% and 55%. While agriculture does have immense potential, it is a longer-term play. The services sector in India has grown rapidly over the past two decades. However, it is the manufacturing sector that holds the greatest promise both in terms of GDP and also in terms of immediacy. Indian manufacturing has undergone several evolutionary steps since Independence, from laying down our industrial foundation to the License Raj era to the post-liberalisation boom. Automotive, engineering, chemicals, pharmaceuticals, and consumer durables have traditionally been the key drivers of the sector’s growth. Going forward, India aims to become a global powerhouse for manufacturing everything from electronics, batteries and semiconductors to defence equipment and aircraft.
The government is making significant efforts to lay down the foundations. For instance, defence contracts contain clauses that require bidding companies to manufacture equipment, from fighter jets to weapons systems, locally. Even major aircraft manufacturers like Boeing and Airbus are being called upon to build their jetliners locally in India. These steps and many more are being taken to steer us towards achieving the government’s target to grow manufacturing from 16–17% of the GDP to 25% by 2025. But to get there, India will have to bolster its infrastructure significantly, streamline the regulatory environment, embrace the power of Industry 4.0 and further the ease of doing business.
But most importantly, we must harness the power of our people. India has been blessed with a demographic dividend. We have a dynamic young population brimming with vigour, enthusiasm and ambition. That makes our people our biggest asset and the ticket to our economic ambitions. The median age of our population is 28 years, according to the United Nations’ World Population Prospects, and this young population, if equipped with the right skills, can turbocharge our economic growth further.
India’s entrepreneurial spirit is also being unleashed, giving the country’s youth the skills to realise their new-age business ideas. This complements the government’s focus on nurturing startups, empowering entrepreneurs living in our country’s farthest-flung corners and fuelling their ideas and dreams. India had 84,012 startup companies in 2022, up from just 452 in 2016, according to the Economic Survey 2022–23. These startups created over 9,00,000 direct jobs; nearly half were founded in our smaller towns.
But these are only the internal drivers of our economic resilience. Another reason for optimism is the evolving geopolitical scenario that has placed India at the centre of a new multipolar world. For much of our independent history, the world was run by a bipolar order dominated, on the one hand, by the American-led West against the Soviet bloc. China replaced the USSR as the second pole in this bipolar order. Having served as the factory to the world for the last few decades, China is now stepping up its political ambitions, fraying the already-uneasy relations between China and the West further.
India, by its unique geopolitical and economic positioning, offers options to the West as a manufacturing counterbalance and a political axis on which to exercise its regional influence. India has also taken the mantle as the voice of the Global South. Confident, proud and assertive, the new India stands in marked contrast to the India that was dictated to by global powers. These factors and our English-speaking proficiency mean we are emerging as a real alternative to China. Companies worldwide are turning to what has commonly become known as the China+1 strategy, the 1 being India, diversifying operations away from our neighbour.
Certainly, there are challenges that we need to navigate if we are to fulfil our economic potential. We need to lift our population out of poverty, continuously skill our youth, boost the participation of women in our workforce, be a sustainability leader, drive innovation, and raise the quality of our civic services like healthcare and so on. But there’s no denying that we sit astride a confluence of forces that seem to be working in tandem to propel us to unprecedented economic heights. That’s why I’m bullish on India’s future and the future of our economy. The optimism is real, and it’s palpable.
Harsh Goenka
Chairman, RPG Group