The days when India was known as a poor and backward country are definitely gone. Today India is becoming one of the world’s biggest economic superpower.
Let’s do a deeper analysis.
Article written Marco Vicario, member of Liuc Finance & Investment Club.
But first... a little bit of economic history
India has an economic history of thousands of years that dates back to the Indus valley civilization. The Indus civilization had a great economy, which can be seen by the importance of trade that this civilization gave and also facilitated transportation. After this civilization, India experienced various dominations under which the economy has been thriving. With the advent of the Europeans everything changed and India saw a sharp decline in its economy.
These were rough years for the Indian population, however, after the independence the economy slowly started getting back to its roots and the government of India focused on various aspects like agriculture, industries, trade and foreign policies.
Is India becoming an economic superpower?
In 2022, India topped Britain, in terms of gross domestic product, making the South Asian nation the world's fifth largest economy, according to the International Monetary Fund. India is expected to overtake Germany in terms of GDP in 2025 and Japan in 2027 to become the third largest economy after the U.S. and China.
India's economic growth has been driven by the global trend toward diversified supply chains that has emerged from the COVID pandemic.
The two drivers of growth: green energy and supply chain
Today as today India's growth is mainly driven by two sectors: renewable energy and supply chain. As for the first one, in 2021-2022 a total of $14.5 billion was invested in renewable energy, up by 125% compared with financial year 2020-21 and 72% higher than in the pre-pandemic period of the 2019-20 financial year.
Moreover, the Indian government has planned to invest $4.3 billion in 2023 in order to become the leader in green hydrogen production and to develop a huge solar project in the Himalayas.
Speaking about the supply chain, it’s known that there are several reasons why India can become a supply chain leader. First of all, there has been a big effort by the Indian government to develop infrastructure including road, rail and port connectivity; furthermore India is focusing also on reducing costs and time of transportation of about 15-20%.
There are some specific industries in which the supply chain modernization could be very attractive, among these we find pharmaceutical sector, telecommunications, automotive and smartphone manufacturing.
As an example, Apple has started assembling its latest iPhone 14 in India, moving some production away from China and other locations.
Another emerging sector: healthtech
The adoption of technology has massively transformed the healthcare space in India in the past few decades, with the pandemic further accelerating the trend. The numbers that have been recently published by RBSA Advisors are impressive, according to the report the Indian healthtech market is expected to grow at a compound annual growth rate of 39 per cent and touch $50 billion by 2033, currently it is worth $2 billion.
India presently houses about 4800+ startups in the healthtech space and 52 healthtech startups have received funding in 2020 alone of over USD 500mn. In the last three years, the healthtech sector has received over USD 3bn private capital funding.
But.. India still has one of the highest levels of income inequality
According to the Oxfam report, in 2022 the number of billionaires in the country increased to 166 from 102 in 2020. Meanwhile, it added that the poor in India "are unable to afford even basic necessities to survive".
The report highlighted the large disparity in wealth distribution in India, saying that more than 40% of the wealth created in the country from 2012 to 2021 had gone to just 1% of the population. In 2021 the Gini coefficient (a statistical measure of income inequality that goes from 0% to 100%, where 100% means total inequality), was 82.3%.
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