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Capital City

New Delhi

States and Union Territories

29 states and 7 union territories

Government

Federal Parliamentary Constitutional Republic

Population (2017)

1.3 billion (2nd largest)

Area

3.1 mn sq. km (7th largest)

Official Language

Hindi and English

Nominal G.D.P. (2017)

US$ 2.5 trillion (7th largest)

Annual GDP Growth Rate

7.6% (7th largest)

Median Age

27.6 years

Currency

Indian Rupee (INR)

Exchange rate

1 USD = Approx. 65 INR (Dec. ’17)

India is the world’s largest democracy and one of the fastest growing economies in the world. Its macroeconomic stability, resilience to deal with external shocks and a stable political system makes it one of the most attractive global destination for investments. In recent times, India has attracted significant FDI as well as indigenous investments across sectors in line with Government’s initiative of “Make in India” in 25 major sectors of the economy. India’s large population base coupled with growing consumer prosperity has created wide range of opportunities from consumer goods and pharmaceuticals to infrastructure, energy and agriculture.

According to the FDI report 2017[1] , for the second running year, India was the highest ranked country by capital investment, with $62bn worth of FDI in 809 projects announced in 2016. India also jumped 30 spots to secure a place among the top 100 countries on World Bank’s Ease of Doing Business Ranking 2018. The emerging trends indicate that the Indian economy will continue to grow at a healthy pace in foreseeable future and will emerge as the global hotspot for investments by capitalizing on various enabling factors, some of which are discussed ahead.

Demographic Dividend

India has the largest youth population in the world with 65% of its population below 35 years of age. India is expected to add 173 million people in working-age population by the year 2026. By that time, India will have the largest working age population in the world. The demographic dividend, on one hand will provide India with an immense economic growth potential while on the other hand it will also allow India to successfully lead as a manufacturer of labor intensive products. In order to tap the demographic dividend effectively, Government of India has launched a mega campaign Skill India with an aim to train 400 million people by 2022 in various vocational courses.

Growing Domestic Consumption

India has one of the largest and youngest population in the world with majority lying in the working age group. As a result, the disposable incomes as well as consumer’s willingness to spend is increasing rapidly. The middle class households, which are the key consuming class, grew from 11 million in 2006 to 55 million in 2016 which is further expected to reach 95 million by 2026. The consumer spending in India has also increased from USD 81 billion to USD 245 billion from 2011 to 2016. The overall increasing income of the middle class and their soaring aspirations are changing the dynamics of the market, thus putting India on the path to becoming one of the world’s largest consumer markets in the near future.

Manufacturing Competitiveness

In 2014, Indian Government launched Make in India initiative to focus on job creation and skill enhancement in 25 major sectors of the economy. Under this, Government has relaxed FDI norms in several major sectors and worked extensively towards improving ease of doing business, digitization, supporting start-ups etc.

India’s raking in World Economic Forum’s Global Competitiveness Index has jumped 16 ranks to 39th position among 138 countries (2016-2017). A cross country comparison of Global Competitiveness rankings indicate that India is close to China while more competitive than several emerging Asian and African nations like Vietnam, Kenya, Bangladesh and Ethiopia.

Table: Global Competitiveness Index

 

Parameters

India

China

Vietnam

Kenya

Bangladesh

Ethiopia

1

Institutions

42

45

82

86

125

75

2

Infrastructure

68

42

79

98

114

115

3

Macroeconomic environment

75

8

77

122

65

78

4

Health and primary education

85

41

65

114

105

111

5

Higher education and training

81

54

83

97

118

127

6

Goods market efficiency

60

56

81

77

96

105

7

Labor market efficiency

84

39

63

31

120

70

8

Financial market development

38

56

78

50

99

102

9

Technological readiness

110

74

9

89

122

131

10

Market size

3

1

32

70

38

66

11

Business sophistication

35

34

96

47

107

93

12

Innovation

29

30

73

36

121

57

 

Overall Ranking

39

28

60

96

106

109

 

Infrastructure

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government towards creation of world class infrastructure in the country. India Government has an ambitious target of US$ 375 billion investment in infrastructure by 2020, including US$ 120 billion for developing 27 industrial clusters and an additional US$ 75 bn. for road, railway and port connectivity projects.

Roads- Roads are a major mode of transportation in India, as they carry almost 80% of the country's passenger traffic and about 65% of freight. India’s road network is the 2nd largest in the world with a total length of more than 5 million kilometers.

Railways- Indian rail network is the largest in Asia and second largest in the world under one management. Indian Railways has a total track length of ~115,000 kilometers spread across more than 8,000 stations and operates more than 19,000 trains every day.

Ports- There are 12 major and ~200 minor ports in the country. The total cargo traffic in India stood around 1,100 million metric tons in 2016-17.  India is the 16th largest maritime country in the world with a coastline of about 7,500 km.

Power- The total installed capacity of power station in India stands at 330 Gigawatts. India ranks 2nd among 40 countries in EY’s Renewable Energy Country Attractiveness Index (2017) on strong Government focus on renewable energy and timely implementation.

Policy Support

Union Government of India and State Governments provide a host of financial and non-financial support to all segments of the industry – manufacturing, services as well as agriculture. The support ranges from industry specific requirements to general support such as export promotion. The Government of India has recently relaxed FDI policy in 15 sectors, such as raising the foreign investment limit for some sectors, easing the conditions for others and putting many on the automatic route for approval. The recent policy direction has created a favorable policy regime and robust business environment which has resulted in significant investment in the country.

Political Stability

Political stability plays an important role in determining economic growth of a country. India, the world's largest democracy is considered as one of the most stable countries in Asia. The country has a Federal Republic Government consisting of 29 states and 7 union territories. The Indian political system is supported by Executive, Legislative and Judiciary. India is committed to working in a federal, democratic and cooperative framework, and making sure that businesses can make use of the immense opportunities that the country possesses.

 

India is growing stronger as a nation and an economy because of the above discussed factors, and many more. We at Wazir Advisors strongly believe that the development trajectory of India will continue to grow exponentially creating multi-billion dollar business opportunities for national as well as international investors in wide spectrum of industry segments.

***

AUTHORS:

Varun Vaid, Associate Director | This email address is being protected from spambots. You need JavaScript enabled to view it.

Ayushi Puri, Associate Consultant | This email address is being protected from spambots. You need JavaScript enabled to view it.

 

[1] Compiled by FDI Intelligence, a division of Financial Times

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