India's Investment Opportunities: Why You Should Invest Now

India is one of the world's fastest-growing economies, with a large consumer base, rising urban incomes, and the largest youth population in the world. It is expected to become the world's third-largest economy by 2027, surpassing Japan and Germany, with a GDP exceeding US$5 trillion. India's stock market has been on a tear over the last three years, up 46% compared to 20% in global equities. The country's economic growth is underpinned by various factors, including its large young consumer market, expanding working-age population, and investments in infrastructure. India's equity market is large, deep, and highly liquid, with a diverse range of sectors and company types. The country has also made strides in improving its alternative dispute resolution framework and has a supportive stance towards arbitration. With its pro-growth policies, improving ease of doing business, and favourable demographics, India offers a compelling investment case for foreign investors.

India's economy is growing

India is one of the world's fastest-growing economies, with a total FDI inflow of $1,013.45 billion from April 2000 to June 2024. The country has the largest youth population globally and is expected to have one of the youngest populations in the world until 2030. India also has the third-largest group of scientists and technicians.

Political Stability

The Indian government is inviting foreign direct investment (FDI) and participation in various sectors. It offers single-window clearance at both the central and state levels, with assured 24-hour clearance in some cases.

Infrastructure Development

The government is targeting $1 trillion in infrastructure investments in the 12th five-year plan (2012-2017). It has announced the National Infrastructure Pipeline, with nearly 9,700 projects across different sectors, totalling more than $3,093.51 billion in investments.

Rapidly Expanding Consumer Market

India is projected to be one of the world's largest consumer markets by 2025. According to Deloitte, India will become the second most competitive manufacturing destination by 2018. With 65% of the population in the working-age group, India offers cost competitiveness and a large base of basic English-speaking workers.

Renewable Energy

FDI inflow in the renewable energy sector over the last four years stood at over $2 billion. The government plans to meet 15% of its energy requirements through renewable sources by 2020.

Services Sector

The services sector accounts for 50% of India's GDP and has grown by over 10% annually for the past decade. The National Innovation Council has set aside over $900 million to facilitate talent development in the R&D sector.

Investment Opportunities

India offers numerous investment sectors, including automobile, biotechnology, railways, chemicals, civil aviation, defence, food processing, ports, power, roads and highways, construction, gems and jewellery, healthcare, heavy industry, education, SEZs, steel, telecommunications, tourism and hospitality, leather, IT and ITeS.

Ease of Doing Business

The Indian government has implemented several reforms to improve the ease of doing business, such as the Goods and Services Tax, National Investment and Infrastructure Fund, and India Industrial Land Bank. India has risen in global rankings for competitiveness and logistics performance.

Global Competitiveness and Innovation

India has climbed to 39th rank in the Global Innovation Index, a significant leap in nine years. It is also recognised for its social security programs, such as the Aadhar Scheme and Pradhan Mantri Jan Dhan Yojana.

India has a large, young labour force

India has the third-largest pool of scientific and technical manpower in the world. It also has a large English-speaking population, with English being the language of instruction in schools and colleges. This makes India an attractive investment destination for companies looking to tap into a skilled and talented workforce.

The country's large, young labour force offers a significant consumer market for businesses. With rising income levels, discretionary spending is expected to increase, making India the fifth-largest consumer market by 2025.

The government is also committed to improving the investment environment and has taken several steps, including liberalising the FDI regime, progressively revising FDI caps upwards, and moving from a small 'positive' list to a small 'negative' list.

India has a STEM-focused educational system

India has a large and growing population, and its education system is evolving to meet the needs of the future. STEM (Science, Technology, Engineering, and Mathematics) education is a crucial part of this evolution.

The Importance of STEM Education in India

STEM education is essential to equip Indian students with the skills needed for success in the modern workforce. The world is becoming increasingly technology-driven, and future jobs will require STEM skills. By embracing STEM education, India is ensuring that its students are prepared for the challenges and opportunities of the 21st century.

Advantages of STEM Education in India

Critical Thinking and Creativity Development

STEM education encourages critical thinking, problem-solving, and creativity. It provides students with practical knowledge and demonstrates the real-world applications of the concepts they learn. This hands-on approach enhances decision-making and strategic thinking abilities.

Multifaceted Skill Development

STEM learning teaches a range of skills, including logical reasoning, innovation, inquiry, and cooperation. It also helps students understand how everyday gadgets and technology work, giving them practical insights into the devices they use daily.

Encouraging Experimentation

STEM learning relies on experimentation, allowing students to explore multiple solutions to problems. This fosters a culture of innovation and critical inquiry, which is a significant purpose of STEM training.

Team Spirit Promotion

Collaborative STEM activities build a sense of team spirit and collaboration among students. This is an essential skill for the workplace and helps students develop their social and communication abilities.

Initiatives by the Government of India to Strengthen STEM Education

The Indian government has recognised the importance of STEM education and has taken several initiatives to strengthen it:

• 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.
• The Indian government encourages STEM education for girls and women through various opportunities, such as the Early Academy Fellowship offered by UK universities.
• The Atal Innovation Mission fosters curiosity, creativity, and design thinking through Atal Tinkering Labs, providing hands-on learning opportunities and competitions, exhibitions, and workshops for STEM learning.

Challenges in India's STEM Education

While India has made significant strides in promoting STEM education, some challenges remain:

• Gender Disparities: Only 57% of girls want to pursue STEM careers compared to 85% of boys. This is a significant hindrance to filling the skilled workforce gap.
• Infrastructure Challenges: High-quality STEM education requires dedicated spaces, facilities, trained teachers, and an integrated curriculum. While the government has taken steps to address these issues, more needs to be done.
• Integration of Technology: Adopting new technologies and moving beyond traditional teaching methods is essential for effective STEM education.

India's focus on STEM education is a crucial step in preparing its students for the future. By encouraging critical thinking, creativity, and practical problem-solving skills, India is fostering a generation of innovators and technology leaders. While challenges remain, the government's initiatives and the dedication of educators are helping to create a STEM-ready generation.

India has a diverse equity market

India has the most diverse equity market in the world. The country offers the widest choice of stocks, with 4,528 companies listed and available for trading on the BSE—that's more than are offered by the New York Stock Exchange and Nasdaq combined (3,689), and far more than the 2,689 listed firms on the London Stock Exchange.

The diversity of India's equity market is a result of the country's past economic policies, such as small-scale reservations and restrictions on the growth of large enterprises through the Monopolies and Restrictive Trade Practices Act. This diversity is expected to increase further, as many sectors such as the internet, insurance, transportation services, and power have only a limited presence on bourses, unlike developed markets.

The dispersed nature of economic power in India, with a greater number of smaller players, makes the country's equity markets far more resilient than other emerging markets. This competitive environment forces companies to focus on niches that may do well even during a slowdown. For example, while the domestic automotive sector has been in the grip of a slowdown for three years, Maruti Suzuki's passenger cars and Eicher Motors' two-wheelers have performed well.

The diversity of India's equity market also provides investors with more opportunities to find winners, even in poor market conditions. This could be one of the reasons foreign investors remain bullish on India, despite a general risk aversion to emerging-market assets. Most listed companies in India are small and medium enterprises operating in niche segments, which grants them some protection from a general demand slowdown.

India's government is pro-growth

Political Stability and FDI Invitation:

• The Indian government, under the leadership of Prime Minister Narendra Modi, has brought political stability, which is conducive to economic development and growth.
• The government actively invites Foreign Direct Investment (FDI) and has implemented policies that encourage foreign participation in various economic sectors.

Infrastructure Development:

• The government is targeting USD 1 trillion in investments in infrastructure development during the 12th Five-Year Plan (2012-2017).
• It has made significant investments in roads, highways, railways, ports, smart cities, and other critical infrastructure projects.

Rapidly Expanding Consumer Market:

• India is expected to become one of the world's largest consumer markets by 2025, presenting vast opportunities for businesses.
• The growing middle class and increasing disposable income will drive consumer demand.

Support for Innovation and R&D:

The National Innovation Council has allocated substantial funds to facilitate talent development and promote research and development (R&D) in the country.

Favourable Policies and Regulations:

• The government has introduced policies such as the National Manufacturing Policy, which aims to increase the manufacturing sector's contribution to GDP and create more employment opportunities.
• It has also implemented tax reforms, such as the Goods and Services Tax (GST), to create a common national market and improve the ease of doing business.

Focus on Key Sectors:

The Indian government has identified and is promoting investment in key sectors such as automobile, biotechnology, railways, chemicals, civil aviation, defence, food processing, and renewable energy.

Simplifying Investment Procedures:

• The government has introduced single-window clearance systems at both the central and state levels to streamline the process of obtaining permits and approvals for investments.
• It has also established entities like the National Investment and Infrastructure Fund (NIIF) to attract investments in infrastructure development.

Reducing Red Tape and Corruption:

The effective implementation of the Right to Information Act, 2005, and the government's efforts to eliminate red tape and corruption have improved the transparency and efficiency of doing business in India.

In summary, India's government is pro-growth, as demonstrated by its commitment to economic reforms, infrastructure development, FDI invitation, support for innovation, and improvements in the investment environment. These initiatives position India as a promising investment destination with vast potential for businesses seeking growth opportunities.

Frequently asked questions