India’s Economy – The road ahead

Advisory Council for India - City of London – May 2016
In the midst of Brexit, the City of London Advisory Council and the High Commission of India invited me to a panel discussion providing an update on the economic reforms taking place in India. Since the start of 2016 Prime Minister Narendra Modi has promoted the phrase ‘reform to transform India’, further committing to his government’s plans for rapid economic growth.

The City of London recognises the importance of working with India as it continues with its economic plans, perhaps driven by the UK being ranked as one of the top 3 investors in the “land of festivals”.  The transformation of India’s economy is needed, as the country has a population of approximatively 1.2 billion people, of which around 70% are under the age of 40.  The High Deputy Commissioner of India has pointed out what “a great opportunity” this is for India, if managed correctly. Perhaps more telling is that the World Bank forecasts that India will be the largest economy by 2030. 

Kick starting India’s economy

After two years in office, Prime Minister Modi has revived India’s economy and has successfully fought corruption, which previously proved a significant drag on the economy. He has also promoted Digital India, which aims to ease the way of doing business and improve market access. Another programme, Start-Up India promotes entrepreneurship and brings lots of advantages to the market. Also, doing business in India has been simplified, with numerous laws being removed over the past 2 years. 

India’s population is around 1.2 billion people
India’s population is around 1.2 billion people

Evidence of these programmes working include the service sector performing significantly better than the real economy since Narendra Modi took office, and India now having the third largest start-up economy in the world. India’s cement and engines production have grown from 1% p.a. to around 9% p.a., showing the impact of the Modi Government’s policies and their support for infrastructure developments. This can be seen in the transport sector that has received a much-needed boost with accelerated road building and significant investments into the ageing rail network.

Next steps

The Indian Rupee is one of the best performers of emerging market currencies, providing a stable backdrop for economic development, and the fall in crude oil prices over the last year have helped India to deliver on its economic plans.  Looking forward, a higher oil price would significantly impact growth. Also, to continue with the growth that the Modi Government has committed to delivering, critical reform is needed across the Indian financial and business sectors. Watch this space.