Before getting into a deeper view of the Indian economy, it is important that we understand the current scenario of the Indian market, which is explained in brief in this article as well as we need to know the details about the Indian market size, its classification, current rules and reforms being implemented in the country.
Market Size of India
India holds enormous growth potential to become one of the major powers in the world. Its growth potential lies in the fact that it is the second-largest populated country in the world. The Indian market can be divided into four parts. These are:
- Labor Market
India comprises the cheapest labor market in the world. It consists of technically sound and highly qualified labor. This cheap labor market in India attracts global companies to set up their branches in India.
- Capital Market
The capital market consists of the bond market and the share market. Both public and private sector undertakings can raise long-term and short-term funds to fulfill their requirements.
- Commodity Market
The commodity market consists of the wholesale and retail markets. Its exchange of goods and services is estimated in terms of the domestic currency.
- Money Market
The money market is directly related to the foreign exchange market and comprises all the lendings and borrowings in the country.
Other points of consideration about Indian market size:
- The expected growth rate of the Nominal Gross Domestic Product (GDP) for the fiscal year 2019-20 was 12%. It was estimated to be 11.5% for the year 2018-19 but in the first quarter of 2019, it grew only 5%.
- According to a report by NASCOM, with over 4750 technology startups consisting of around 1400 new startups in the year 2016, India has the third-largest startup base in the world.
- According to a report by ASSOCHAM and Thought Arbitrage Research Institute, India’s labor force is projected to reach 160-170 million by the year 2020.
- According to a report by the Reserve Bank of India, Indian foreign exchange reserves till December 2018 were US$393.29 billion.
The Indian economy is witnessing a rapid growth rate. It is, in fact, one of the three major economies in the world developing at the fastest rates. It is lagging only by China by only a tiny fraction.
The growth rate of China for the year 2019 is estimated to be 6.1% while the growth rate of India for the same year is estimated to be 6%.
Thus, India is the second-fastest-growing economy in the world after China owing to its partnerships and strong democracy.
But this growth rate was expected to be higher than what it is for both India and China.
According to an Indian Monetary Fund (IMF) report in July 2019, India was expected to grow at a rate of 7% rather than the actual growth of 6% only.
Yet another report of IMF in the ‘World Economic Outlook’, has projected India’s economic growth to be 6.1%. In its report, the IMF stated that India saw a weaker than expected attitude for domestic demand.
United Nations Trade Agency in its report has stated that India will suffer a slowdown in its economic growth from 7.4% last year to only 6% this year but also stated that in spite of its slowdown in economic growth, India will remain at the second position in the world in economic growth.
The ‘United Nations Conference on Trade and Development (UNCTAD)’ held in Geneva earlier this year stated in its report that the world growth rate will suffer a downfall to 2.3% this year from 3% in the year 2018.
The report by UNCTAD said that India proceeds with a decelerating pattern which was started four years back.
India’s growth rate has been projected to be lower than the expected growth rate because of the sharp fall in the growth rate of the first quarter of the year which was only 5.8%.
The volume of exports and imports in India has also seen a drastic change as compared to the previous years as well as from the projected ones.
The value of exports has decreased from 6.6 % in 2017 to 4.3 % in 2018 while the value of imports has decreased from 11.7 % in 2017 to only 3.1% in 2018.
Expected Economic Status of Indian Democracy In The Next Ten Years.
- Owing to globalization, digitalization, demographics, and reforms by the government, Indian GDP is expected to reach US$ 6 trillion by the fiscal year 2027 and is expected to reach upper-middle-income status.
- India is additionally concentrating on sustainable sources to produce energy. India has planned to increase its sources of energy from non-fossil sources to 40% by 2030 compared to the current 30% and has plans to expand its sustainable power source limit in the years to come.
- According to a report presented by the Boston Consulting Group (BCG), India’s consumption may triple to US$ 4 trillion by 2025.
- According to a report released by PriceWaterhouseCoopers, India my surpass the US by the year 2040 in terms of Purchasing Power Parity (PPP).
- It is estimated that India’s Gross Domestic Product (GDP) will rise to US$ 5 trillion by 2025 and US$8.4 trillion by 2030 from US$2.7 trillion in 2019. With an average annual growth rate of 8%, India would surpass the US and would become the second-largest economy next to China.
- India’s per capita income is expected to rise to $5,700 in 2030 from the current $2,000.
- India’s actual growth is expected to rise from 6.2% in 2020 to 8.5% in 2025.
- India consists of the largest young population, under the age of 25, this according to a report by Standard Charted, requires the nation to create around 100 million jobs in the country in the service and the manufacturing sectors by 2030. This could be achieved by easing the labor laws, increasing the women’s workforce, and closing the widening skills gap.
- India will be the world’s most populated country by the year 2030 and the population is expected to reach around 1.5 billion.
- In a report by the World Bank titled ‘Global Economic Prospects’, it was stated that the Indian economy is regaining after a short downfall due to the implementation of demonetization and the Goods and Services Tax (GST).
- Indian finance minister, Arun Jaitley discussing roads of development for the following 20 years, said that gender equality, infrastructural growth, and rural expansion would be the greatest sources of economic growth.
- According to a 2011 Census report, the Indian population living below the poverty line was 21.9%, and has reduced to 17% in 2019 and is expected to reduce to 15% by 2025.
- With India seeing a high GDP development rate, a huge piece of this development is relied upon to be centered around consumption. Dr. Anil Gupta, an author of books on globalization, noticed that India’s household consumption at the present costs will develop to $5 trillion from the present $1.6 trillion. This $3.4T increment will be India’s new consumption power that organizations can take into account across customer groups, topographies, and sorts of consumption needs.
Separating the new consumption capacity, Dr. Gupta says that half of this $3.4 trillion will be individuals purchasing similar products they are purchasing today, generally food products and necessities, yet in bigger amounts.
The key point to note here is that the greater part of India’s populace right now is provincial and poor. The other portion of the development will originate from the poor section and new item classifications where they don’t devour anything today (e.g., natural products of the soil).
As individuals gain higher purchasing power, they will expend more merchandise that they try to have, which could be esteemed costly for them today. Normally, non-food products will become 1.5x quicker than food products in the coming decade.
According to Dr. Gupta, India will witness a sharp decline in the population living below the poverty line. It would fall to 5% in 2030 compared to 15% in 2019.
By 2030, India will consist of 60% rural area compared to the current 66%
By 2030, India will comprise the majority of the young population with a median age of 31 years compared to that of the US and China where the median age would be 40 years.
Thus, India will consist of the largest young workforce in the world.
India, consisting of a large population and growing at a very fast pace is expected to be the second-largest economy in the world.
The only country it will lag behind would be China. But to reach and remain in this position, India has to take several actions which will not be very easy but not impossible also.