India’s platinum jubilee or Azadi ka Amrit Mahotsav? It’s an unusual feeling for sure, all my colleagues from the media are busy writing articles from different angles. Schools and colleges are planning different celebrations and I am waiting to see the students marching band this morning. I always love listening to the tune that students play during independence day at their schools. The melody of bugle and the march of students… Adding to that this year, every house will have a Tiranga… While celebrating Independence day I honestly think, writing the balance sheet for 75 years is not easy… There are thousands of developments that happened during this time. Here I would like to highlight a few aspects related to the economy and finance.
India is like a continent
A friend of mine from Zurich told me she is going to Germany by train and it will take her three hours to reach Berlin. On a lighter note, I told her that while you can reach a different country in three hours, in many parts of India I can’t even reach a different state in the same timeframe. The country of 139 billion people has a massive demography. Not just the states, but even districts have their own identities. In Maharashtra, Nashik is all about grapes and onions, but Nagpur is all about oranges. India is spread from the rocky mountains of Sahyadri in the western ghats to the Alps of the Himalayas. The choppy ocean of Vizag to Kanyakumari carries various streams of cultural heritages. That’s why they say, ‘ghat, ghat par badle pani, kos kos par vani’. In the last 75 years, India has made breathtaking innovations in technology, pharmaceuticals, education, finance and many other sectors.
We have built engineering marvels like Konkan Railway, which even German engineers refused to build, and the Arch Bridge on the Chenab river in Kashmir.
The rise of the Indian economy – The current dashboard
Nobody predicted India’s digital transformation story. Just a decade ago, we were really concerned about financial inclusion but today more than 80 per cent of the population is under the banking net, with a big contribution from the JAM trinity. “The account ownership more than doubled in the past decade, from 35 per cent in 2011 to 78 per cent in 2021,” according to the global Findex database 2021 by World Bank.
Global economists and foreign investors are looking at the Indian market with big hopes. The Sensex benchmark index has also touched 60,000 and Morgan Stanley has predicted Sensex would hit 70,000 by the end of 2022. With Rs 1.48 lakh crore in the last month of July, the GST collection is touching new highs every month. And most of the high-frequency indicators are showing positive signs. India is the sixth-largest economy in the world. Around six billion digital transactions are happening on the India-made UPI platform every month. And the Unicorn startups have already crossed the 100 mark. With these numbers, India has redefined its presence in the world today.
India’s economy then
Coming a long way from slogans like ‘Garibi Hatao’, we have adopted slogans like ‘Digital India’ today. The country has struggled hard with poverty. The enervating droughts and food crises made India sign P.L.480 agreements with the US. After the oil crisis of 1973, inflation rose sharply while growth slipped. To curtail the impact, the government even imposed a 97.5 per cent tax on incremental income. India’s licence raj policy kept private companies away and the traditional industries had a tough time. The cotton mills in Mumbai lost their sirens and modern businesses emerged by razing the chimneys of mills. On the other side, the government nationalised Air India and banks, and formed the Life Insurance Corporation. The green revolution, which began in Punjab, and the White revolution (led by Amul milk) made a big difference. The government-owned HMT, car manufacturers Hindustan Motors and Maruti emerged as pillars of Indian businesses, while Bajaj Auto with its scooter showcased the ‘Buland Bharat ki buland tasveer’. But what made a big difference was the liberalisation policy of 1991. Many foreign companies entered India in diverse sectors such as insurance, automobile, pharmaceuticals, etc.
India hereafter
India is a global economy today with imports of $66.27 billion and exports of $36.27 billion, as of July 2022. Hence along with internal challenges, India will also face external challenges. The war in Ukraine has certainly made the world rethink its global strategies and dependency on critical products. In my opinion, apart from geopolitical risks, India will face a few more challenges. India’s current unemployment rate is 7.7 per cent. This is challenging because on one side, the companies are struggling to hire a skilled workforce, on the other hand, the attrition rate across industries is really high. With the proliferation of technology, the demand for skilled labour has gone up significantly and India Inc, specifically the BFSI companies, are finding it tough to train their existing workforce and hire new ones. Apart from this, bringing the large informal sector under the organised one is a big task. With tax reforms like GST, this has been achieved to a certain extent, but a large part is still out of the organised sector. I think another challenge businesses will face is data privacy. As the majority of businesses embrace technology, handling privacy is going to be a key area.
In my view, the next decade will be very unusual from the last 75 years and the government and policymakers will have a tough role to play henceforth. Because now the industrial revolutions are fuelled by technology and we are heading towards Web-3 and metaverse. In the virtual world, the digital currency will drive the transactions and digital downloads will be another business along with e-commerce. With work from home becoming a promising reality, no harm in thinking that virtual reality is here already. Hence, no excuse to the constant reskilling and reshaping of businesses to the businesses, you and me as well. If we succeed in embracing the art of innovation, the economy and finances will blossom for another 75 years and thereafter…
https://www.focus-economics.com/blog/the-largest-economies-in-the-world
