The world’s largest democracy and the second fastest growing major economy, India has been a riveting market for many overseas investors and businesses. With a rapidly growing population of more than 1.3 billion which comprises of a vibrant middle class and a demographic trend which is focused towards youth, the potential of India seems almost unbounded.
India has been seeing an exceptional economic growth in recent years supported by robust democracy, focused structural reforms, personal consumption and increased government investment.
The Indian government has eased a number of restrictions on Foreign Direct Investments (FDI) in a bid to attract FDI into India. FDI net inflows have grown at a rate of over 30% compounded annually over the last decade. Also, liberalization of the Indian regulatory framework has enhanced its attractiveness as a business destination.
In a bid to attract foreign investment, the Indian government has eased FDI restrictions, such as raising foreign equity caps for insurance and defence sectors, leading to significant progress in terms of improving its overall business environment. As a result, India jumped 14 places to 63rd position on the World Bank's Doing Business 2020 study. New business reforms have also earned India a place among the world’s top ten improvers for the third consecutive year according to the same study. According to Junaid Ahmad, World Bank Country Director in India, “India’s impressive progression in the Doing Business rankings over the past few years is a tremendous achievement, especially for an economy that is as large and complex as India’s. Special focus given by the top leadership of the country, and the persistent efforts made to drive the business reforms agenda, not only at the central level but also at the state level, helped India make significant improvements.”
Modern India has had a strong focus on science and technology, realizing that it is a key element for economic growth. At rank 48, India stands among the top 50 countries in the Global Innovation Index (GII) 2020 with a score of 35.6. India has become a powerhouse in terms of technology innovation. High-tech companies in sectors such as telecommunications, information technology, pharmaceuticals, textiles, and engineering are equal in their sophistication and prominence to international counterparts. Indeed, India is now recognized as a major force in global technology innovation alongside the USA and China.
India has a huge consumer base and according to World Economic Forum Report, 2019, India is poised to become the third-largest consumer market behind only US and China and consumer spending in India is expected to grow from USD 1.5 trillion at present to nearly USD 6 trillion by 2030. With an annual GDP growth rate of 7.5%, India is currently the world’s sixth largest economy. By 2030, domestic private consumption which accounts for 60 percent of the country’s GDP is expected to develop into a USD 6 trillion growth opportunity. India has a large and healthy middle class, making it an attractive consumer market. Indeed, India is the world’s largest market for manufactured goods and services, and ranks number 3 out of 141 economies for market size according to the WEF’s Global Competitiveness Index. This market is only anticipated to further grow. The WEF estimates that India’s total consumption expenditure will grow to $5.7-6 trillion by 2030.
The ease of doing business is an important indicator of the investment friendly business climate in the country. As many as 20 states have successfully completed ease of doing business reforms stipulated by the Government.
Political stability has implications for investment, consumption and economic growth and India is deemed to offer political stability with commitment to democracy that is extremely important for any foreign investment. India’s economic growth has been exceptional in recent years. Buoyed by a robust democracy, key structural reforms, private consumption, and a rise in government investment, India has achieved a high macroeconomic stability ranking (with a score of 90 out of 100 and ranked 41 out of 141 economies) in the World Economic Forum’s (WEF) Global Competitiveness Index.
Infrastructure is a key driver of the overall development of any economy and India is no exception. India has been witnessing surging investment in infrastructure over the past years especially in the metropolitan areas. India offers good living standards with efficient transport systems, world-class healthcare facilities.
India offers a competitive and a structured tax system and the importance of taxes are defined by two attributes-progressive and proportional. The system also offers a comprehensive network of tax treaties with various other countries.
India is well-positioned geo-economically and geo-politically to create and provide highly skilled human capital.
India’s banking and financial system is robust and has been progressing rapidly with many innovative banking models. Businesses can also tap into capital markets as an alternate source of financing.
India boasts of a well-emerged and efficient and unified judicial system where businesses can depend on the rigorous enforcement of laws to protect their rights.
Indians are hardworking and accommodative and operate in a professional manner.
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