Overview
India is currently in a recession with the novel coronavirus pandemic impacting GDP growth.
However, India’s long-term growth story is intact. There are several reasons to believe that the country can be an economic powerhouse in the coming years.
I want to discuss five key factors that can trigger strong long-term growth for India.
Factor One – Rising Middle Class
According to Consultancy Asia, economic boom will see 500 million Indians enter into the middle-class segment in the next decade.
A favorable demographics coupled with a rising middle-class is likely to be a game changer for the economy.
Of course, the middle-class has been impacted by the pandemic. However, this is just a temporary impact and the long-term outlook is still bright.
Factor Two – Low Leverage Among Consumers
GDP growth is triggered by various factors. One of the factors is consumption driven GDP growth. As an example, the United States is primarily a consumption driven economy.
However, consumers in the United States and Europe are already over-leveraged. On the other hand, the consumers in emerging markets like India are not significantly over leveraged.
In particular, in tier two and tier three cities in India. Therefore, as GDP growth is back and consumer confidence increases, India’s consumption spending is likely to surge.
This will ensure healthy GDP growth.
Factor Three – Focus on Agriculture
The agriculture sector in India still has big potential. To put things into perspective, China’s agricultural yield per hectare is still double that of India.
With recent government initiative and bills for the agriculture sector, I believe that there is scope for growth.
Even if the agriculture sector growth rate doubles (very likely), it will have a big impact on GDP growth and consumption growth for the economy.
In the Budget for 2020, a 16-point action plan for the sector has been drafted. In the next five years, the sector can potentially drive GDP growth.
Factor Four – Make in India Driven Growth
Its worth noting that the trade war between Chin and the United States has still not de-escalated.
In the coming years, its very likely that some manufacturing will shift from China to India.
India has been pitching itself as a manufacturing hub and this is likely to yield results.
The advantage is GDP growth coupled with job creation. As new jobs are created, it will trigger higher consumption growth.
Therefore, growth in the manufacturing sector can result in a chain reaction that boosts several other sectors of the economy.
Reason Five – Infrastructure Investments
Poor infrastructure remains one of the biggest bottlenecks for growth in India.
However, that’s likely to change. According to the India Brand Equity Foundation Report, India plans to spend US$ 1.4 trillion on infrastructure between 2019 and 2023.
This will have a big impact on GDP growth. Additionally, investments will continue beyond 2023. As India’s infrastructure improves, more foreign companies will be willing to pursue direct investment in the country.
Conclusion
China grew at over 10% for more than two decades. In the coming decade, India has the potential to grow at 10% if the public and private sector work in co-ordination.
I strongly believe that India is likely to be a economic powerhouse in the next decade.
Views and opinions are invited.