India’s economy to remain robust in 2024-25

The bright backdrop of lead economic indicators such as high growth of manufacturing, steady exports trajectory, robust domestic consumption, softening inflation and ever high FOREX reserves will pave the way for a great gung-ho in 2024-25. India’s enhanced trajectory of bilateral relations with the Middle East and Europe is strengthening its global integration and attraction for global trade and investments.

The new financial year 2024-25 is coming with a great backdrop of strong economic indicators, and aspirations for a great gung-ho in the financial year2024-25. India is a long-term growth story, driven by robust consumption expenditure. The post-COVID years have witnessed a great momentum in the economic activity; GDP growing robust at 9.1% in 2021–22, 7.2% in 2022–23 and 7.7% (projected) in 2023–24. The financial year 2024-25 is also expected to remain robust to maintain growth at high road.

The capital market has witnessed a great surge with a market value of USD 4 trillion in 2023, placing India among the top 5 markets in terms of market capitalization. Start-ups number went to new highs and exports performed robust despite geo-political conflicts and uncertain global demand conditions. Tax collections reached at new highs and fiscal deficit projected at 5.1% for 2024-25 is in line with expectations; the aim is to achieve a fiscal deficit level below 4.5% of the GDP by 2025-26. Inflationary pressures are softening towards normal trajectory; February 2024 CPI inflation at 5% and FOREX reserves have reached a new high of USD 642.5 billion as of March 22nd 2024.

Our consumption story is intact, stimulating private capacity expansions, motivating manufacturers and exporters to expand their production horizons and to create new employment possibilities in their respective factories. According to the Household Consumption Expenditure Survey 2022-23, the per capita monthly consumption spending has increased by about 40% in 2022-23 from 2011-12. This is accompanied by a reduction in inequality as the rural-urban difference in consumption expenditure is diminishing.

At this backdrop, India will be a USD 4 trillion economy in the current financial year 2024-25, USD 5 trillion in 2026–27, and a USD 7 trillion economy in 2030 and USD 30 trillion in 2047. We are all set to position ourselves as the 2nd largest in the Asia-Pacific region and the 3rd largest in the World by 2030 and “Viksit Bharat” by 2047.

India’s sustained growth is being boosted by new economic segment of startups. New businesses and Start-Ups are becoming employment-creating innovation ecosystem in India. India is the World’s 3rd largest, Asia's 2nd largest, and South Asia’s 1st largest startup ecosystem, with more than 1 lakh startups, and over 100 unicorns, creating more than 12 Lakh jobs in the country. India occupies a significant position within the realm of startups, standing prominently in the Asian startup ecosystem. Our nation has earned an international presence, as five (Bengaluru-Karnataka, Kerala, Odisha, Tamil Nadu, and Telangana) Indian startup ecosystems have earned places among the top 15 startup ecosystems in Asia.

Supported by prudent economic reforms, the businesses are flourishing the economy. Our new tax regime is attractive with an effective tax rate of 25% for existing corporates and 17% for the newly set-up domestic companies, with various benefits extended up to 31st March 2025. This has established one of the best tax ecosystems in India. The government has significantly improved the Ease of Doing Business. More than 40,000 compliances have been removed and more than 3,400 legal provisions have been decriminalized to enhance Ease of Doing Business in the country.

The World Bank in “Ease of Doing Business Report 2020” says that India has been placed at 63 in the Ease of Doing Business among 190 countries. The enhanced ease of doing business has fostering entrepreneurship zeal and generating self-employment opportunities at lower capital costs. The Micro, Small, and Medium Enterprises (MSME) sector, with more than 630 lakh enterprises, has emerged as a strong segment of India’s business environment.

India's geopolitical significance is growing, earning praise from international institutions. India posted the highest ever exports at USD 776 billion in FY 2022-23. Despite the tussle in Red Sea, India is maintaining its exports momentum; in FY 2023-24 as well, India’s exports will be in the positive growth. India is on its way to increasing its exports to the target of USD 2 trillion, USD 1 trillion in merchandise exports, and USD 1 trillion in service exports by 2030.

With its outstanding Presidency of the G20, India has emerged as a global thought leader, connecting many regions with its initiative of India-Middle East-Europe Economic Corridor (IMEC). This will re-engineer the global value chains and shift the economic order towards the global South. Three major railway corridors announced during the Interim Budget- Port connectivity corridor, energy, mineral and cement corridor, and High traffic density corridor, will boost overall economic activity and generate more jobs leading on a higher growth path.

After signing the free trade agreements with East - Asia and South Asian countries, India is moving towards developing bilateral relations with Middle East countries with initiatives including a Bilateral Investment Treaty and a Comprehensive Economic Partnership Agreement and Intergovernmental Framework Agreement between India and UAE on the India-Middle East Economic Corridor among other initiatives. India’s bilateral relations with Europe are also gaining pace; recently India and EFTA (European Free Trade Association) signed TEPA (Trade and Economic Partnership Agreement) to enhance India’s bilateral outreach towards the European Union

To support the employment creation and overall economic activity; the CAPEX has been increased from Rs.7.4 lakh crore in 2022-23 to Rs. 9.5 lakh crore in 2023-24 and Rs 11.11 lakh crore for 2024-25. To increase innovation in the country and enhance the competitiveness of the enterprises, a corpus of Rs 1 lakh crore, was announced during the Interim Budget for 2024-25, with a 50-year interest-free loan. India has enormous potential for an artificial intelligence (AI) revolution, being the third largest talent pool for AI talent in the World, with investments in India's AI capabilities growing at a CAGR of more than 30%.

In conclusions, the strategic reforms and policy initiatives starting from the Make in India, ease of doing business, the new Insolvency and Bankruptcy Code 2016 (IBC), Start-up India, skill India, Digital India, Atamanirbhar Bharat, recapitalization and merger of public sector banks, New Foreign Trade Policy 2023, National Policy on Electronics, National Education Policy, Production Linked Incentives (PLI) scheme, among others are paving the strong path for sustainable and higher economic growth trajectory for the next many years.