What will India's economy be in 2025

How is the Indian economy doing in 2021?

In the past few years, India's economy has become one of the fastest growing economies in the world. Based on the World Bank's nominal gross domestic product (GDP), India ranked fifth in 2019 at $ 2.86 trillion. Still, the country fell to sixth place during the coronavirus pandemic, based on the International Monetary Fund (IMF) estimates for 2020 ($ 2.59 trillion).

India is expected to overtake the UK, Germany and Japan and become the third largest economy in the world in the next 10 to 15 years as investments pour into the country all the time.

India economy overview

India's GDP was roughly $ 452.74 billion for the second quarter of fiscal 2020-21, a slight decrease from $ 489.62 billion for the same period last year. Reserve Bank of India Governor Shaktikanta Das expects the recently announced government spending to boost economic activity and investment.

In addition, the IMF's latest World Economic Outlook predicts the Indian economy will grow 11.5% this year, making it the only major economy to see double-digit growth amid the resurgence of Covid-19 cases. India's Economic Survey for 2020-21 also expects growth of 11% in the current fiscal year (through March 2021), attributing this to the introduction of vaccines and the recovery in consumer demand.

Apart from the fact that India is one of the top economies in the world, the country also has the fourth largest number of so-called unicorns (start-ups valued at at least one billion USD). The Hurun Global Unicorn List counts more than 21 unicorns with a total value of $ 73.2 billion. A Nasscom-Zinnov report predicts the India economy will have around 100 unicorns by 2025, creating about 11 million direct jobs.

To boost productivity and economic growth, India needs to increase its employment growth rate and create 90 million non-farm jobs between 2023 and 2030 to achieve 8 to 8.5% GDP growth over that period, according to the McKinsey Global Institute to reach.

India is the second most populous nation in the world after China, with over 1.38 billion people based on November 2020 estimates. The country is expected to take the top spot by 2024 and reach 1.5 billion by 2030.

Currency and central bank

The country's official currency is the Indian rupee, which is divided into 100 paises. However, since 2019 only the 1 rupee coin has been in use as the lowest value. The Reserve Bank of India (RBI) serves as the central bank and currency regulator under the Treasury.

As India's central monetary authority, the RBI aims to achieve price stability, control the expansion of bank lending, encourage fixed investments, restrict inventories, increase efficiency in the country's financial system, create flexibility, and allow significant autonomy in financial operations.

The RBI recently changed the way it forecasts the rate of inflation. This adjustment came just days after the Indian government approved the RBI to maintain its 2-6 percent inflation target for the next five years.

Industry and Commerce

India's economy can be divided into three sectors: agriculture, industry and services. Historically, India is an agricultural country: in the 1950s, over 50% of GDP came from agriculture. However, this proportion has decreased over the decades and the service sector has become the most important sector.

In 2018, agriculture in India contributed around 17% to 18% of the country's GDP and employed more than 50% of the total labor force. The top five agricultural products on a total value basis are rice, buffalo milk, cow milk, wheat, and cotton.

Manufacturing and industry generate 26% of India's GDP and employ 22% of the workforce. The pharmaceutical industry in India has expanded rapidly in recent years and currently holds 20% of the global generics supply, measured by volume. The country is also an important producer of textiles and clothing, as well as pulp and paper.

From April 2020 to November 2020, India's total exports were approximately $ 304.25 billion, down 14.03% year over year, while total imports over the same period increased 29.96% to $ 290.66 billion. USD declined.

Studies and rankings

In the Heritage Foundation's Index of Economic Freedom 2021, India improved from 129th to 121st worldwide and from 31st to 26th among the Asia-Pacific countries. However, the country remains in the “mostly unfree” category.

At the same time, the Indian economy was able to maintain its position in the Ease of Doing Business of the World Bank with a value of 71.0 in 63rd place among 190 countries. The World Economic Forum's Global Competitiveness Index (GCI) ranking was paused for 2020, but in 2019 the country fell ten places to 68th.

Stock exchanges and capital markets

India has two major stock exchanges where most of the trading takes place, namely the Bombay Stock Exchange (BSE) and the National Stock Exchange of India Limited (NSE). The BSE was founded in 1875 and is considered the oldest stock exchange in Asia, while the NSE was founded in 1992. Nonetheless, both exchanges follow the same trading mechanism, trading hours and settlement process.

The main indices used to measure the performance of the Indian stock market are the S&P Bombay Stock Exchange Sensitive Index or BSE SENSEX, a market-weighted index based on the free float of 30 BSE companies, and the NIFTY 50, which is the weighted average examined by 50 of the largest Indian companies at the NSE.

Bond market

Government bonds in India are mainly issued for periods ranging from 5 to 40 years. There are several variants, including Treasury Bills, Special Gol Securities, and State Development Loans (SOLs).

Corporate bonds are available in the form of convertible bonds, non-convertible notes (NCDs), perpetual bonds, zero coupon bonds, masala bonds, external commercial borrowings (ECBs), and foreign currency bonds (FCBs).

For the first time in history, a negative yield was listed on the country's government bond trading platform in March 2021. A negative return of approximately 1.5% was offered by the Clearing Corporation of India’s Negotiated Dealing System for the 6.17% bond due in 2021. This was the first time this has happened to India, where the benchmark 10-year bond is trading above 6%.

Real estate market

In JLL's Global Real Estate Transparency Index 2020, India was ranked 34th out of 99 countries with an overall rating of 2.69. In 2019, more than $ 6.06 billion of investments were made in the country's real estate market, with approximately $ 3.3 billion invested in commercial real estate.

The central government plans to create 20 million units of affordable housing in urban areas by 2022, which should significantly boost the housing sector. The government has also approved Foreign Direct Investment (FDIs) with up to 100% participation in settlement and development projects.

India's real estate sector is forecast to be $ 650 billion by 2025, which is 13% of India's GDP.

News, backgrounds and analyzes. The business editor for Asia Investments.