THE CONTEXT: India’s exceptional growth trajectory is marked by advancements across multiple sectors, positioning it as a global player. With a youthful population, thriving digital economy, and expanding manufacturing base, India is harnessing its demographic dividend and embracing innovation for sustainable economic development.
ECONOMIC GROWTH AND FINANCIAL MARKETS:
- India currently boasts the world’s fourth-largest stock market, showcasing its growing prominence in global finance. The market has seen a remarkable surge in daily average cash-trading levels, which have tripled from pre-Covid levels. This increase in trading activity reflects the growing confidence and participation in India’s financial markets.
- Foreign portfolio investments have been substantial, with ₹3,39,066 crore invested in the fiscal year 2023-24 and an additional ₹1,71,248 crore recorded in 2024-25. These figures underscore the continued attractiveness of Indian markets to international investors.
- IPOs increased by 66% from 164 in FY23 to 272 in FY24. The amount raised through IPOs grew by 24% from ₹54,773 crore to ₹67,995 crore in the same period.
MANUFACTURING AND SERVICES SECTOR:
- The manufacturing sector has made significant strides, complemented by government initiatives to strengthen domestic production capabilities. The “Make in India” initiative has been instrumental in transforming the nation into a global manufacturing hub, focusing on enhancing industrial capabilities, fostering innovation, and creating world-class infrastructure.
- India continues to dominate in information technology (IT), cloud computing, and data science, solidifying its reputation as a global hub for knowledge-based services. The services sector remains the backbone of the Indian economy, contributing significantly to GDP and employment.
Government Initiatives:
- The “Make in India” initiative aims to secure India’s position as a critical player in the global economy.
- Production-Linked Incentive (PLI) Schemes covering 14 key sectors have been introduced with an impressive outlay of ₹1.97 lakh crore.
- Other supportive programs include PM Gati Shakti, the National Logistics Policy, and tax reforms like the Goods and Services Tax (GST).
FDI Inflows:
- FDI inflows rose from $45.14 billion in 2014-15 to $84.83 billion in 2021-22.
- Between April 2014 and March 2024, India attracted $667.41 billion in FDI, representing nearly 67% of the total FDI received over the past 24 years.
- In FY 2023-24, total FDI inflows reached $70.95 billion, with equity inflows at $44.42.
DIGITAL INDIA AND TECHNOLOGICAL INNOVATION
- India’s digital economy is experiencing rapid growth, transforming the nation’s technological landscape. The Digital India initiative has significantly increased internet penetration and smartphone usage. Internet subscribers rose from 25.1 crore in March 2014 to 95.4 crore in March 2024, making India home to one of the largest smartphone user bases globally.
- The Unified Payments Interface (UPI) has been a remarkable success in digital payments. India now accounts for 46% of global real-time payment transactions, with UPI processing nearly ₹81 lakh crore in transactions between April and July 2024 alone.
- India is rapidly advancing in AI, blockchain, and data science, attracting global investments and driving economic growth.
- India boasts one of the youngest populations globally, 65% under 35. This demographic advantage positions India for significant economic development over the next three decades.
GEOPOLITICAL POSITIONING AND FOREIGN RELATIONS:
- India increasingly engages in global forums such as the G20, Quad, and BRICS, strengthening its voice on climate change and security issues. Its role as a stabilizing force in South Asia and engagement with major global powers have enhanced its strategic importance.
THE ISSUES:
- Recent slowdown in foreign portfolio inflows: While the overall figures remain impressive, there has been a recent deceleration in foreign portfolio investments. This could be attributed to various global economic factors and shifting investor sentiments.
- Volatility in global markets: As an emerging economy, India’s financial markets are not immune to global economic fluctuations. The interconnectedness of global markets means that external factors can impact India’s financial stability and investor confidence.
- Need for Further Improvement in Ease of Doing Business: Despite significant progress in improving the business environment, with India climbing from 142nd in 2014 to 63rd in the World Bank’s Doing Business Report (DBR) 2020, there is still room for improvement.
- Global Competition in Manufacturing: India is positioning itself as a preferred destination for companies looking to diversify their global supply chains, suggesting ongoing competition with other manufacturing hubs.
- Digital Divide: Given the focus on increasing internet penetration, a digital divide likely exists in rural areas. Robust cybersecurity measures are needed to protect the growing digital economy.
THE WAY FORWARD:
- Maintain high-yielding markets: India’s high-yielding markets continue to attract significant foreign investors’ interest. India can sustain this appeal and attract further foreign investments by ensuring competitive returns and maintaining economic stability.
- Encourage multinational corporations to list in India: The trend of global companies like Hyundai and LG choosing to list in India is a positive sign. Encouraging more multinational corporations to list on Indian exchanges can boost market depth and attract global attention.
- Strengthen Implementation of PLI Schemes and Other Initiatives: Continued support and strengthening of programs like the Production Linked Incentive (PLI) Schemes, PM GatiShakti, and the National Logistics Policy will be crucial for sustained growth.
- Further Simplify Regulations and Reduce Bureaucratic Hurdles: Building on the progress in improving the ease of doing business, India should continue simplifying regulations and reducing bureaucratic obstacles to attract more investments and enhance competitiveness.
THE CONCLUSION:
India’s growth narrative is characterized by demographic advantages, strategic government initiatives, and a commitment to innovation and sustainability. With a robust foundation and clear trajectory, India is poised to emerge as a leading global economic powerhouse, reshaping global economic paradigms.
UPSC PAST YEAR QUESTION:
Q. Faster economic growth requires an increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. 2023
MAINS PRACTICE QUESTION:
Q. Discuss India’s demographic dividend and its impact on the country’s economic growth. How can India leverage this advantage to ensure sustainable development over the next three decades?
SOURCE:
https://pib.gov.in/PressNoteDetails.aspx?NoteId=153213&ModuleId=3®=3&lang=1
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