As the world’s fastest-growing major economy moving towards a GDP target of $10 trillion by 2030, India finds itself at the edge of a pivotal transformation. Fueled by 140 million people joining the middle class within the next few years, India’s growing consumer economy has caught global attention.
Add a large entrepreneurial workforce and affordable skilled talent, and India seems set to become the ultimate emerging market. For international corporations and investors seeking high returns, participating in the world’s open-air start-up hub, and creating game-changing ideas from healthcare to energy solutions, India’s economic resurgence represents an important opportunity.
Let’s understand this in more detail.
India’s Economic Growth Trajectory in 2024 and Beyond
India’s economy is expected to remain on a positive growth trajectory in 2024 and beyond, even as global economic conditions face challenges. Here’s a breakdown of the outlook with relevant statistics:
Current Situation:
- India is projected to be the fastest-growing major economy in 2024.
- The OECD expects India to grow at 6.1% in 2024, compared to China's anticipated growth of 4.7%.
- The International Monetary Fund (IMF) forecasts global growth to decline from 3.5% in 2022 to 3.1% in 2024, while India is expected to maintain a higher growth rate.
Growth Projections:
- The Government of India projects a growth of 7.3% in FY 2023-24.
- Rating agency Icra expects growth to be around 6.5% in FY 2024 and 6.2% in FY 2025.
- Deloitte forecasts growth between 6.9% and 7.2% in FY 2023-24, followed by 6.4% and 6.7% in the next year.
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Factors Driving India's Economic Expansion
A combination of key factors paves the path to India’s growing economy. The increasing demand for goods and services, driven by a growing population and supportive policies, sets the stage for a vibrant market. Here are five key factors driving India’s growth.
Strong domestic demand: India is likely to see continued expansion in domestic consumption and investment, cushioning growth from global headwinds. Government infrastructure push with planned spending of over $1.5 trillion by 2025 is further bolstering demand and construction activity.
Favorable demographics: With a median age of 28 years, over 90% of Indians will still be under the age of 60 by 2030. This young, rising workforce will support economic growth through higher productivity and consumption.
Manufacturing and export focus: The “Make in India” campaign has seen early wins by raising the share of manufacturing to 17% of GDP, while merchandise exports have also made robust gains, crossing $447.46 billion during FY 22-23. Government incentives promoting localized production and export competitiveness will further benefit diversification.
Supportive policies: Business-friendly reforms in taxation, FDI regulations, insolvency resolution, and reduced red tape have improved India’s ease of doing business rankings significantly since 2015.
Innovation drive: India has climbed 40 spots since 2015 in the Global Innovation Index, with focused investments to expand access to credit, R&D, and IP protection, further boosting technology and start-up-led growth.
Opportunities for Global Businesses
India’s growing economy presents several high-potential opportunities for global companies across sectors:
- Accessing India's large consumer market as incomes and consumption continue rising
- Leveraging India's technology talent and innovation ecosystems
- Utilizing India as a cost-efficient global manufacturing and export hub
- Investing in India's infrastructure development in areas like energy, transport, and industrial corridors
- Partnering with Indian companies as domestic champions expand internationally
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Challenges in Entering the Indian Market
While the opportunities seem abundant, global businesses must be aware of key challenges when entering the Indian market.
Global economic slowdown: A worldwide recession or regional downturn can negatively impact India’s exports and foreign investment inflows, which may have a tempering effect on growth.
Inflation: Managing inflation remains a challenge, although it is expected to moderate in the latter half of 2024.
Geopolitical uncertainties: Events like the Russia-Ukraine conflict fuel commodity price pressures globally. Being integrated with world markets exposes India indirectly.
Compliance and bureaucracy: Despite government efforts, red tape, and regulatory obligations remain for foreign companies across central and state levels during setup and operations.
Fierce competition: Both Indian corporates and incumbent multinationals are competing aggressively across sectors, making customer acquisition costly.
Currency volatility: The Indian Rupee has weakened considerably recently, increasing foreign exchange risks for overseas entrants.
Credit access issues: India’s banking system grapples with non-performing assets, slowing new lending currently impacting access to capital.
Conclusion
Despite near-term risks posed by global headwinds, India’s long-term economic growth story remains compelling for global businesses. Backed by strong domestic demand, favorable demography, manufacturing gains, and innovation drive, India is projected to chart the fastest expansion globally over the next decade. While challenges exist, the opportunities across consumer markets, talent access, infrastructure development, and escalating private investment continue to outweigh the risks for global corporations seeking outsized returns.
