Indian economy is set to be the 3rd largest by 2030, says Great Lakes Chennai academician

Make in India initiative has come a long way in increasing the share of manufacturing (particularly electronics manufacturing) within India. (iStock)

Robust urban demand, uptick in private investment over government’s front-loading of capex, and pick-up in real estate and the festival season can be attributed as some of the factors.

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A growing economy

Prof Vishwanathan Iyer, Senior Associate Professor and Director of Accreditation, Great Lakes Institute of Management, Chennai recently spoke on how global financial trends including exchange rate impacts, trade deficits (or surplus) in goods and services, FDI’s and FIIs are among the direct channels that impact India’s corporate sector.

The ‘spillover’ effect on the recipient economy is felt to the extent of the integration with the global financial markets. India’s GDP touched the $3.75 trillion-mark in 2023 and the country has moved from the tenth largest to the fifth largest economy in the world.

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Key sectors expected to deliver results 

Prof Iyer said, “Government’s infrastructure push and defense manufacturing are expected to do the heavy lifting as far as the growth in the GDP is concerned. The key drivers here are the Gati Shakti initiative (National Master Plan for Multimodal Connectivity) and industrial corridor development. While Make in India initiative has come a long way in increasing the share of manufacturing (particularly electronics manufacturing) within India, its direct linkage with the exports is a function of the ability of the international markets to absorb. Hence, while growth in manufacturing is robust, it is mainly aimed at internal consumption.”

The global financial system has been significantly impacted due to the recent banking turmoil in the US and Europe. (iStock)

Exports of Services are improving and expected to contribute to the growth story, he added.

“The first is about the fundamentals or the Core Balance Sheet of these entities. The global financial system has been significantly impacted due to the recent banking turmoil in the US and Europe. However, the sector in India has been quite stable and resilient. The Gross and Net NPA ratios have fallen to a 10-year low of 3.9% and 1.0% respectively as per the March 2023 data. This also shows the ability of the banks to finance future both medium and long term projects,” he said.

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An inclusive service sector

The second aspect, he emphasised, is that of making the sector inclusive.

The PM Jan Dhan Yojana has become the means to provide access to credit, insurance, pension and various other banking/financial services, he said.

India has the highest Fintech adoption rate of 87 % as opposed to the global average of 64%. (iStock)

“The aspect is that of digitization of the access. With an upward 10 billion monthly volume of digital payments, India has the highest Fintech adoption rate of 87 %. This is as opposed to the global average of 64%,” he elaborated.

Seventy-five per cent of all retail digital payments in India are done via UPI, he added. The most recent example of acceptance of Indian UPI has been France. It has eliminated the need for carrying forex cards or cash while traveling, he shared.

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A healthy jump

He reported that the PMI is at a 13-year high. Real goods and services tax collections are 35 % higher than the pre-COVID levels.

“Passenger vehicle sales and service exports are 131 % and 184 % of pre-COVID levels. These broader trends can be further confirmed from the recent Q1 results for FY2023-24. A healthy jump in the YoY growth of Revenues, Gross and Net Profit can be seen across multiple sectors,” he detailed.

While the global economy is still facing significant challenges, the Indian growth story continues to remain robust.

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