Rapid and Resilient Economic Growth

India, an ancient land with a young population, is on the cusp of a transformative journey. It took India 60 years to become a trillion-dollar economy in 2007; it took eight years to reach two trillion and then five years to reach 3.5 trillion. In the process, it has crossed Brazil, France and the UK. Assuming the current trend of 6 per cent real, and 10 per cent nominal growth is maintained, India will be the third largest economy by 2030 at six trillion dollars.

India has been the fastest-growing major economy both before and after the pandemic. Demographics provide a further runway to this:

• Youthful Demographic Runway: India houses a young population with a median age of 28 years. Every sixth working-age person in the world is an Indian, and the UN projects India will enjoy the largest workforce growth of any single country, accounting for 23 per cent of global workforce growth (second only to the entire African continent).
• Language Advantage: India represents the largest English-speaking population in the world, with some 256 million who can speak the language, boosting saving, investment, and integration into global commerce.
• Rising Domestic Consumption & Per Capita Income: As India transitions from a lower middle-income to an upper middle-income economy, per capita income is expected to increase from US$ 2,450 to US$ 4,000 by the end of the decade, driving a virtuous cycle of consumption and investments.
• Scale of Affluent Households: The number of individuals in households earning more than $40,000 a year is expected to rise three times to 169 million — about half the population of the United States.
• The Expanding Middle Class: The middle-income population (annual income between US$ 7,000 to US$ 40,000) increased approx. 25 per cent in 5 years, reaching 439 million by 2020-21 despite COVID-19, and is projected to surge to approx. 700 million by 2030 (representing approx. 47 per cent of the population).

Office of the World Attempting to Become the Factory of the World

India’s ambitious Production Linked Incentive (PLI) scheme is expected to boost its share of manufacturing in emerging technologies, such as drones and electric vehicles. The scheme will help create a robust manufacturing ecosystem, attracting domestic and foreign investments such that by 2025, India should become a global manufacturing hub, increasing manufacturing’s contribution to GDP to 25 per cent.

Global multinationals have shown intense interest in investing in India given factors such as a large and stable democracy, an alternative under the China Plus One strategy, relentless focus on structural reforms, and geopolitical advantages through leadership roles in the G20 and the QUAD.

Global Capability Centres (GCCs) & Services Exports

Manufacturing will complement India’s pandemic-proof services exports, which rose to approx. US$ 180 billion in FY2022 (four times the FY2008 number) and is estimated to grow three times to US$ 530 billion by FY2032.

• A fourth of such exports originate from Global Capability Centres (GCCs) set up by multinationals attracted by India’s rich human capital.
• India is today home to half of all GCCs opened outside their home countries, housing over 1,500 such entities.
• By 2026, 500 more GCCs are expected to be added, creating over two million direct jobs.

Digitisation for Inclusive Growth

Essential to this growth, and for financialization to occur in parallel, is the inclusive, publicly owned India Stack, which is interoperable, democratises data, and is decentralised. India has emerged as the most significant player in real-time payment transactions globally, commanding a share of close to 50 per cent of global real-time digital payments.

• OCEN & ONDC Synergy: The Open Credit Enablement Network (OCEN), supported by the Open Network for Digital Commerce (ONDC) — which offers a network-centric model connecting buyers and sellers regardless of platform — will dramatically raise credit penetration by transitioning to cash flow-based lending and seamless data sharing.
• Credit Growth Acceleration: This digitization and macro stability will increase lenders’ risk appetite, with research houses projecting retail/MSME loan growth to accelerate to between 16 to 19 per cent CAGR over the next decade (up from 14 per cent over the past five years).

Infrastructure Development & Clean Energy Transition

Infrastructure spending has an estimated economic multiplier of three times. In the last decade, India has built thrice as much infrastructure as in the preceding 60 years, with road networks, port capacities, and airline connectivity doubling. Plans to construct 35,000 kilometres of national highways by 2025 will sharply reduce logistics costs and enhance export capabilities.

Green Energy Transition:

• India doubled the Renewable Energy (RE) mix in electricity to 19 per cent between 2016 and 2022, while natural gas rose to 6 per cent of primary energy.
• Under India’s COP26 commitments, renewables are targeted for a five-fold growth over the next decade.
• Renewable energy in India is already among the cheapest forms of power without subsidy dependence, backed by a favorable regulatory framework.

Skilling and Women’s Participation in the Workforce

India aims to train over three hundred million individuals by 2025 through industry-aligned skilling initiatives, providing the technical talent needed for innovation and entrepreneurship.

Furthermore, promoting women’s workforce participation is pivotal for economic growth and gender equality. Increasing women’s labour force participation by ten percentage points is estimated to add US$ 770 billion to India’s GDP by 2025.

Strong Financial System & Balance Sheet Deleveraging

India possesses a robust banking system characterized by low non-performing assets (NPAs) and high capital adequacy ratios:

• Tax-to-GDP Expansion: Supported by GST input tax credit matching and economic formalization, the government aims to elevate the tax-to-GDP ratio from 17 per cent to 22 per cent by 2025.
• Corporate & Bank Deleveraging: While non-financial sector debt in most global economies expanded post-2008, India’s debt burden declined due to comprehensive banking balance sheet clean-ups and corporate deleveraging. Non-financial debt-to-GDP reduced to approx. 45 per cent from a peak of 60 per cent in FY15/16.
• Credit Upgrades: The ratio of credit rating upgrades to downgrades has jumped to five times.
• Low Household Debt: Household debt-to-GDP stands at only 37 per cent, offering substantial headroom for healthy consumer credit expansion.
• Financialization of Savings: Post-pandemic, the financialization of household savings exceeded physical asset savings as a share of GDP for the first time since FY2000.
• Financial Markets Role: Domestic and global capital pools will be crucial for funding long-term Infrastructure, Manufacturing, and Climate finance.

Conclusion

A vision for New India entails a comprehensive approach to economic development, driven by robust GDP growth, increased manufacturing capabilities, infrastructure development, skilling, and gender inclusivity — all supported by a healthy, resilient financial sector. With ambitious targets across renewable energy, digital infrastructure, and industrial production, India is poised to unleash its economic potential, empower its citizens, and build a brighter, sustainable future for generations to come.

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Author may be reached at: eboard@icai.in