India's Investment Appeal: Why Countries Want A Piece

India's economy is booming, with a projected growth of 6.5% in the fiscal year 2024-25 and 7% in 2026, according to S&P Global. India's large consumer base, rising urban incomes, and the aspirations of the world's largest young population are fuelling this growth. The country is expected to become the world's third-largest economy by 2027, surpassing Japan and Germany, with a GDP exceeding $5 trillion. India's robust economic trajectory is underpinned by resilient growth and favourable demographics. The country has the largest youth population in the world, with a median age of 28.2 years.

India's equity market is large and deep, with a total market capitalisation of over $4.3 trillion as of December 2023, making it the fifth-largest worldwide and the second-largest among emerging markets. The market capitalisation of Indian equities is equivalent to 70% of the Japanese market capitalisation and 63% of the combined market capitalisation of the exchanges within Euronext.

India's economy and borders are open, and the country has abandoned its original 'zero-covid' approach, allowing businesses and production plants to resume operations and creating a foundation for the economy to bounce back strongly. The country's investment climate has improved significantly since the opening up of the economy in 1991, with a more enabling regulatory regime and eased foreign direct investment (FDI) norms. India has implemented many structural economic reforms aimed at enhancing the business environment, including liberalising restrictions on foreign investment and updating bankruptcy and labour laws.

India's strong economic growth, stable political environment, large consumer base, low operating costs, skilled workforce, and linkages to important international markets make it an attractive destination for foreign investment.

India's economy is growing

India's robust economic trajectory is underpinned by its resilient growth and favourable demographics. India has the largest population in the world, with a median age of 28.2 years, providing a large consumer base for businesses. The country's large consumer base, rising urban incomes, and the aspirations of its young population are driving economic growth. India's recovery from the prolonged pandemic, particularly the rebound in private consumption and household spending, has facilitated business expansion plans.

India's economic growth is further supported by its strong investment climate, which has improved significantly since the opening up of the economy in 1991. The country has implemented numerous reforms to enhance the ease of doing business, simplify regulatory compliances, and attract foreign investment. India received the highest-ever foreign investment inflow of $83.6 billion in the financial year 2022 and is expected to attract $100 billion in foreign direct investment (FDI) in 2023.

The Indian government has played a crucial role in the country's economic growth by investing in infrastructure development. The National Infrastructure Pipeline (NIP) encompasses over 9,700 projects across various sectors, including energy, roads, urban development, and railways, with a total investment of over $3 trillion. These investments contribute to enhanced trade within India and across its borders. Additionally, the government has introduced investor-friendly policies, such as the Production Linked Incentive Scheme (PLI), to boost investments in "sunrise" industries like pharmaceuticals, solar energy, and electronics.

India's equity market is also a significant contributor to its economic growth. The country's equity culture is well-established, with the Bombay Stock Exchange (BSE) in Mumbai being the oldest in Asia. The total market capitalization of the Indian equity market exceeds $4.3 trillion, making it the fifth-largest in the world and the second-largest among emerging markets. India's equity markets are highly liquid, with over 170 stocks listed on Indian exchanges having a market capitalization of more than $5 billion.

In summary, India's economy is growing due to its large and young population, strong investment climate, government initiatives, infrastructure development, and a thriving equity market. These factors make India a compelling foreign investment hub and a major investment destination in South Asia.

The country has a large, young consumer market

India has the largest youth population in the world. It is expected that by 2030, there will be 360 million Indian consumers below the age of 30. This presents a huge opportunity for businesses looking to invest in India, as it indicates a large, young consumer market with increasing purchasing power.

The country's growing population and rising disposable incomes are driving an increase in domestic consumption. India's middle class, estimated at 400 million people, is the main driver of this consumption expenditure. The emergence of this middle class, along with increasing disposable incomes, is a significant factor behind the rise in domestic consumption in India. It is projected that the private consumer market in India will increase fourfold by 2025.

The Indian government is also focusing on rural areas and farmers, as rural India is emerging as a new market for all types of consumer goods. This further expands the consumer market in India, providing even more opportunities for businesses to tap into.

Additionally, India's digital infrastructure is being expanded and adapted to meet the needs of these younger, more urban consumers. Already, 43% of digital real-time payments worldwide take place in India, demonstrating the country's advanced digital payment systems.

The combination of a large, young population and a growing economy with increasing purchasing power makes India a very attractive market for businesses looking to invest and expand their consumer base.

India's infrastructure is developing

In recent years, India has witnessed significant growth in its infrastructure sector, with a focus on transport and logistics. The government has set ambitious targets, such as developing a 2 lakh-km national highway network by 2025 and expanding airports to 220. The total budgetary outlay for infrastructure-related ministries increased from around INR 3.7 Lakh Cr in FY23 to INR 5 Lakh Cr in FY24, demonstrating the government's commitment to enhancing infrastructure.

The transport sector is a key area of development, with projects such as the expansion of national highways, the development of airports, and the improvement of waterways. The government has also introduced schemes like the PM Gatishakti National Master Plan (NMP) to enhance multimodal connectivity and streamline infrastructure planning.

The development of urban infrastructure is crucial to accommodate India's growing urban population. By 2036, 600 million people are expected to live in urban cities, representing 40% of the total population. To meet this demand, the World Bank estimates that India needs to invest $840 billion over the next 15 years into urban infrastructure.

Public-Private Partnerships (PPPs) have played a vital role in accelerating infrastructure development. The private sector has actively participated in the construction of airports, ports, highways, and logistics parks. Additionally, foreign investment in infrastructure-related sectors, such as construction and real estate, has contributed significantly to India's infrastructure development.

The Indian government recognises the need to enhance infrastructure to support economic growth. The infrastructure sector acts as a catalyst for India's overall economic development, and the government has initiated policies to ensure the timely creation of world-class infrastructure. The expansion of infrastructure is further facilitated by urbanisation and an increase in foreign investment in the sector.

In conclusion, India's infrastructure is developing rapidly, driven by government initiatives, urbanisation, and private sector partnerships. The country's focus on enhancing its infrastructure will contribute significantly to its goal of becoming a global economic powerhouse.

The country has a STEM-focused education system

India has a strong focus on STEM (Science, Technology, Engineering, and Mathematics) in its education system, which is a key factor in the country's growing affluence and the expansion of its digital sectors. STEM accounts for 34% of Indian graduates, a higher proportion than in many other countries, including France and the US. This focus on STEM education leads to a highly skilled workforce, which in turn generates employment opportunities and the potential for wealth creation.

The country's educational system is producing the next generation of innovators, problem-solvers, and technology leaders. Indian academicians have identified that STEM education is essential to keeping up with the complexities of the new normal after the pandemic and innovative changes like online schooling. The Indian government has also taken visionary steps to improve STEM education, such as the Atal Innovation Mission, which fosters curiosity, creativity, and design thinking in young minds through hands-on learning opportunities.

The country's STEM-focused education system is particularly evident in its university programs. In 2018, almost 32% of students in India were pursuing STEM degrees, with engineering and technology being among the most popular fields of study. This focus on STEM at the university level has contributed to India's large and growing consumer market, which is fueled by young, urban consumers.

The Indian government has also recognized the importance of encouraging girls and women to pursue STEM education. In October 2020, the Department of Science and Technology collaborated with IBM to improve STEM opportunities for girls, targeting meritorious girls and reaching out to students and teachers interactively. Additionally, the Ministry of Education regularly announces opportunities for STEM learning for higher education, such as scholarships for early academy fellowships offered by UK universities.

India's STEM-focused education system is a key factor in the country's economic growth and digital transformation. By equipping its students with STEM skills, India is creating a highly skilled workforce that is well-prepared for the future demands of the global job market.

India is a democratic, secular republic

The Indian Constitution guarantees freedom of religion and ensures that the state does not support any single religion as the official religion. This secular nature of India's government is particularly attractive to foreign investors, who also benefit from India's stable political environment. India's democratic regime ensures calm and stability for investors, and the country ranks highly on the Global Innovation Index.

India's democratic and secular nature also contributes to its growing consumer base, with the country boasting the largest young consumer market in the world. By 2030, there will be an estimated 360 million Indian consumers below the age of 30. This growing consumer base, combined with India's well-developed administration and independent judicial system, makes the country an attractive investment destination.

Furthermore, India's democratic and secular values foster an educated and skilled workforce. The country's educational system has a strong focus on STEM subjects, resulting in a highly skilled workforce that drives innovation and creates employment opportunities. This skilled workforce is another factor that makes India attractive to foreign investors, particularly in sectors such as IT services and pharmaceuticals.

In summary, India's democratic and secular nature contributes to its political stability, growing consumer market, and skilled workforce, making it an attractive destination for foreign investment.

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