India was the fastest growing major economy in the world in 2016 and will continue to grow more than 7 percent in 2016-17, says the International Monetary Fund (IMF) in its latest country assessment.
In economic terms the year gone by has been a banner year for India. In February, it pushed China aside to become the world’s fastest-growing economy. And in October, the IMF projected that India would retain that title for the foreseeable future.
In late December of 2016, for the first time in over 100 years, India official overtook the United Kingdom to become the world’s sixth largest economy. Economists had predicted India would overtake Britain by 2020, but this has happened some four years earlier than expected, spurred by the financial woes that the UK faced in the wake of the Brexit vote.
India’s 2016 GDP of US$2.3 trillion edged past the $2.29 trillion GDP of the United Kingdom on 20 December. This narrow gap is expected to widen in the years ahead until 2020, and probably beyond, as India continues to grow at its current rate of 6 to 8 percent per annum, compared to UK's growth of around 2 percent per annum.
Rapid economic growth over the last 25 years has propelled India ahead of its former colonial ruler Great Britain and placed it just behind France, Germany, Japan, China and the United States, among the world’s largest economies.
The combined impact of strong government reforms and inflation-focused policies by the Reserve Bank that ensured lower-than-expected inflation, along with a price slump in global commodities and stable food prices, benefitted the Indian economy. India's foreign exchange reserves stood at $360 billion by end of March 2016, as compared with $342 billion at same time last year.
Lauding the market and policy reforms being implemented in India that have contributed to improving investor confidence in the economy, several global rating agencies, as well as the IMF and the World Bank (WB) have also delivered a positive outlook for the country.
The WB has forecast a GDP growth rate of 7.5 percent in 2016 followed by further acceleration to 7.7 percent in 2017-18 and 7.8 percent in 2018-19. For its part, the government expects the economy to grow at 7 to 9 percent and to double in size to US$ 4–5 trillion in a decade, realigning India as the world’s third largest economy in absolute terms.
However, India’s growth story has not been without its share of growing pains. Many of the reforms being implemented, including the Goods and Services Tax (GST), which aims to create a unified national tax structure and deregulating the agricultural industry’s fertilizer pricing have had its own share of complications and controversies. While the recent currency reforms, which overnight demonetized the Rs1000 and Rs500 that were in circulation, has led to hardships for ordinary citizens.
The government said it was forced to introduce the drastic measure in order to fight several drastic problems that were hobbling the economy, including widespread corruption and pervasive tax evasion, as well as to strengthen its fight against counterfeit currencies in circulation and cross-border funding for terrorist organizations.
The government’s unexpected step to demonetize the two currency notes, which together accounted for nearly 86 percent of all currencies in circulation, bogged down business transactions, slackened salary payments, and caused winding waiting lines in front of banks around the country, as people gathered to deposit and withdraw cash before the year-end deadline.
Despite these transient teething troubles the government has remained committed to economic and policy reforms, as well as implementing initiatives such as the ‘Make in India’, ‘Start-up India’ and ‘Digital India’, which are seen as crucial to driving the Indian economy on its growth trajectory.
The ‘Make in India’ initiative aims to boost the country’s manufacturing sector, which currently contributes around 15 percent of the
The government also plans to create a National Investment Grid to map business opportunities across the country which will make it easier for investors, especially domestic investors, to access and explore investment opportunities.
Under the ‘Digital India’ initiative the government aims to focus on three core components of creating the necessary digital infrastructure, delivering services digitally and increasing digital literacy. As part of this initiative the government recently created a digital employment exchange that will facilitate employment by bringing together industries seeking suitable workers and job-seekers looking to find employment.
As part of the ‘Start-up India initiative the government recently unveiled the Start-up Action Plan, which besides providing no tax on profits for first three years and relaxed labor laws, will also establish a Fund of Funds for Startups. The fund, with a corpus of $1.48 billion placed with the Small Industries Development Bank of India (SIDBI), will extend support to start-ups and encourage entrepreneurship in the country.
On another note, the government has also launched an initiative to create 100 smart cities as well as to rejuvenate and transform 500 existing cities with a combined outlay of over $14.8 billion. Smart cities are satellite towns of larger cities which will consist of modern infrastructure and will be digitally connected.
Meanwhile, the ‘Pharma Vision 2020’ by the government’s Department of Pharmaceuticals and the Indian Space Research Organization’s (ISRO) push to promote India’s capabilities in the global commercial space market, are entrenching the country’s manufacturing and technological prowess on the global stage. In the first week of February 2017, the ISRO aims to launch a record 103 satellites in one go using its workhorse PSLV-C37 (Polar Satellite Launch Vehicle-C37) rocket. In this multi-satellite launch endeavor it is worth highlighting that 100 satellites belong to foreign nations, including the US and Germany.
The government’s plans to set up a $640 million venture capital fund to boost drug discovery and strengthen pharmaceutical infrastructure as part of its ‘Pharma Vision 2020’ aims to make India a major hub for end-to-end drug discovery.
India has played a major role in lowering global healthcare costs and saving lives mainly through the production and export of generic drugs that are crucial to sustaining medical care in many parts of the world. Indian drugs are exported to more than 200 countries in the world, with the US as one of the key markets.
India’s cost of pharmaceutical production is significantly lower than that of the US and almost half of that of Europe, which gives the country a competitive edge over others. Currently Indian pharmaceutical sector accounts for about 2.4 percent of the global pharmaceutical industry in value terms and 10 percent in volume terms. It is projected that by 2020, India will be among the top three pharmaceutical markets by incremental growth and sixth largest market globally in absolute size.
India- a snapshot
- India is the seventh-largest country by area, the second-most populous country and the most populous democracy in the world.
- Coastline: 7,517 km, including the mainland, the coastlines of Andaman and Nicobar Islands in the Bay of Bengal and Lakshadweep Islands in the Arabian Sea.
- India measures 3,214 km from north to south and 2,933 km from east to west with a total area of 3,287,263 square km of which land area constitutes 2,973,190 square km and water area accounts for 314,070 square km. India’s coastline of 7,517 km includes along the mainland and the coastlines of Andaman and Nicobar Islands, as well as Lakshadweep Islands.
- Latest figures (July 2016) reveal a population of 1,326,801,576 people, with a gender ratio of 944 females to 1,000 males. With a population growth rate of 1.58 percent, India is expected to become the most populous country in the world by 2022.
- For administrative purpose India is divided into 29 States and 7 Union Territories
- Total literacy across India is 74.04 percent (Male 82.14% and female 65.46%)
- Life expectancy is 66.97 years (men), 69.42 years (women)
- Airports Authority of India (AAI) manages 125 airports in the country, which includes 18 international aerodromes, 78 domestic ones and 26 civil enclaves at defense airfields.
- The Indian Railways network extends over 67,312 km, with 12,617 passenger and 7,421 freight trains plying each day from 7,172 stations carrying 23 million travelers and 2.65 million tonnes (MT) of goods daily.
- India’s road network of 4.87 million km is the second largest in the world. With the number of vehicles growing at an average annual pace of 10.16 percent, Indian roads carry about 65 percent of freight and 85 percent of passenger traffic. India also has 14,500 km of waterways that ferry people and goods.
The Indian pharmaceuticals market increased at a Compound annual Growth Rate (CAGR) of 17.46 percent during 2005-16 with the market increasing from US$ 6 billion in 2005 to US$36.7 billion in 2016 and is expected to expand at a CAGR of 15.92 percent to reach $55 billion by 2020.
With 71 percent market share, generic drugs form the largest segment of the Indian pharmaceutical sector. Generic drugs also account for 20 percent of global exports in terms of volume, making the country the largest provider of generic medicines globally and this is expected to expand even further in coming years.
The steps taken by the government in recent times have shown positive results with economic activities witnessing significant growth in the financing, insurance, real estate and business services sector. Analysts are confident that powered by greater access to banking, technology adoption, urbanization and other structural reforms India could grow at a potential 8 percent on average in the mid-term to 2020 and probably well beyond.