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Growth Rate of India is Booming Every Year
According to a Bloomberg report, Indian economy is booming. The country’s GDP is expected to grow between 6-7% this year. India is world’s fastest growing major economy. Many experts says India’s GDP will become $3.5 Trillion in 2023 to $7 Trillion by the end of this decade. Although US and China is still worth of a nation in terms of total Gross Domestic Product(GDP) i.e. $25.4T and $18T.Â
Powered by the population of 1.4 Billion, India could become the leader in world’s economic growth. Many of the world’s biggest investment banks like Morgan Stanley, Goldman Sachs, Barclay’s etc. have keyed in on India as a real prime investment destination right now. With so much investment coming in, companies around the world may soon need to have an India strategy. But what would it take for the country to get ahead?
How Indian and Chinese Growth Rate Increased?
For the last few years, India has reported robust economic growth, playing the role of driver of the economic growth and enjoys the crown of the fastest growing major economy in the world. China opened its market in late 70s but economy only accelerated after 2001 when it joined the World Trade Organisation(WTO). It was the country who attracted foreign investments and was the driver of the financial markets as well as the global capital markets.Â
Every company around the world needed a strategy to deal with China. India didn’t start to liberalise its economy till the 90s and it’s been a slow climb since but with current level at about 7% growing just a bit faster is all it needs to surpass China. India’s per capita income has grown sevenfold from the early 90s to now. There has been significant progress also in the financial markets.
India-China Growth Contribution in World Economy
China on the top, contributes 31% close to one-third of world’s economic growth while India took second place with 17.5%. But what if India grows 1% faster every year, the picture changes to this. Geopolitics and China’s own internal struggles are tipping this trend in India’s favor.
Investors all around the world, short their money from China and putting a lot of funds into India. Nowhere is this more evident than at the Samsung Noida factory on the outskirts of New Delhi, is the world’s largest mobile phone factory producing 120 million handsets a year. Samsung opened the factory in 2018 when business in China was becoming increasingly difficult. It is not alone as the Chinese economy stumbles companies from Apple to Boeing are looking elsewhere and at India at particular. PM Narendra Modi said that India is an engine of growth and a democracy that delivers.
Things That Affect Growth Rate of India
India need to overcome some major hurdles in order to grow sustainably fast. These are manufacturing, urbanisation, workforce and infrastructure.
Manufacturing:- China’s manufacturing contributes 26% of its GDP whereas in case of India it is only 16%. The government aims to increase it to 25% by 2025 which can be achieved as many MNCs have started to shift their manufacturing units to India like Apple started to manufacture iPhones in Chennai.
Urbanisation:- China’s 64% of population lives in urban areas whereas in case of India it’s only 36%. Most people in India still depends on farming. In 90s, China rapidly changed from agriculture based economy to modern urban and industrial economy. The scenario is also changing in India as there has been a lot progress in terms of connecting cities, building railway network, better infra for airports and seaports. These changes will eventually lead the country to urbanisation.
Workforce:- An urban population supports a robust workforce. In 2023, India overtook China as world’s most populous country. While China is ageing more than half of India’s population is under 30, prime working age. It has been seen that if a country’s demographic is in its side, the country grows rapidly.
Infrastructure:- For a very long time, India has suffered by tragic roads, crowded trains and railway stations, not enough airports and seaports. But since 2014, country’s National highway network has expanded more than 50%. There are a lot of airports have been built or building in tier two and tier three cities to make connectivity easier. India is making good progress in building its infrastructure.
Conclusion
If India can address these four challenges then foreign direct investment will likely increase and that flow of money is an essential driver of growth for a country. But accomplishing all this is no easy feat. India also needs to increase its ease of doing business. The government is trying to simplify the bureaucracy for starting or operating a business in India as businesses are the ones who will accelerate the growth of the country.
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