India with the world’s second largest population, India faces crucial economic and development decisions over the coming decades with significant implications for people and the environment. The country is undergoing a period of rapid urbanization: Between 2008 and 2030 the country’s urban population is expected to grow by 250 million. India aspires to achieve equitable economic development and sustainable livelihood opportunities for its 1.25 billion citizens.
Yet these goals are challenged by a slowing economy, energy insecurity, water risks, food shortages, ecosystem degradation, and growing inequality. There is a growing recognition within India’s government and business circles of the need for economic development that also delivers environmental protection.
Access and affordability of regional resources drive the migration patterns which characterize urbanization. The current trend of mass migration (300 million by 2040) is integrally linked with resource driven livelihood limitations in the rural and peri-urban regions, and the promise of economic growth in cities which is far from equitably shared. Thus, the need to understand the economic geography of land, water, and energy resources of the region, and how their use impacts in turn, the quality of life and common property, such as the climate.
Here are at least nine reasons why India is a seriously compelling story for investors:
1. GST in India
With long awaited reform in indirect tax structure to promote one nation and one tax, GST is going to apply from July 1 2017 which enables every business to seamlessly flow their goods and services across the nation and with the new GST Regime, every business connect with global market seamlessly and transparently which boost Indian economy and business structures in India!
2. Size of India
India’s GDP is currently US$1.3 trillion, making it the 8th largest economy in the world. However, in PPP terms, which recognises India’s low cost base, the GDP notionally rises to three times this amount (US$3.8 trillion) which places it on a similar size to Japan and, by 2013, it will become the third largest economy in the world (after the USA and China) in PPP terms. However, despite representing 7.5% of Global GDP (on a PPP basis) in 2010, India attracts less than 0.5% of investment inflows. An anomaly which is unlikely to continue for much longer!
3. Economic growth
India’s economy is currently growing by 8.75% per annum (in 2010) and this GDP growth rate is expected to increase to 9% – 10% per annum for each of the next 10 years. India’s GDP will grow five times in the next 20 years, and GDP per capita will almost quadruple.
The Indian economy offers investors exposure to a wide range of opportunities from consumer goods and pharmaceuticals to infrastructure, energy and agriculture. With its strong services sector (comprising 50% of India’s economy), particularly in knowledge-based services (IT, software and business services) India has proved that industrialisation and the export of commodities and resources is not the only path to rapid economic development.
India is one of the youngest countries in the world, with an average age of 25 and likely to get younger. India’s working-age population will increase by 240 million over the next 20 years. With a population of 1.2 billion, a strong work ethic, high levels of education, democracy, English language skills and an entrepreneurial culture, India is poised to dominate the global economy in the next 20 years.
6. High Savings
With a savings rate of 37% of GDP, India’s domestic savings fuels most of its investment requirements, and only 20% of India’s total public debt is sourced from foreign borrowing. With significant investment to be made in upgrading India’s poor infrastructure in the next 10 years (estimated to be US$1.7 trillion) India’s Government is taking various steps to further encourage private and foreign investments.
7. Domestic economy
India’s domestic consumption, generally led by the private sector, has played a significant role in India’s growth and is expected to remain firm as more people enter the workforce and the emerging middle classes. India’s wealthiest consumers (those earning US$1m or more in PPP terms) will increase by 40 million in the next 10 years! Every sector within India’s consumer market is booming, making India far less vulnerable to external shocks and pressures than other emerging markets.
8. A robust financial sector
India has a robust, diversified and well regulated financial system which has allowed it to weather the global financial crisis without any major difficulties and present an image of quality, resilience and transparency. India’s banking sector is strong, with top quality balance sheets, high levels of competition (there are around 80 banks in India) and strong corporate governance.
9. Quality of Investment Markets
The Bombay Stock Exchange is the second oldest in the world (165 years) and offers investors a low cost, highly efficient, modern and well governed environment in which to prosper from India’s extraordinary economic growth. The Indian stock market has generated investment returns of over 15% per annum for the last 10 years and experts expect this rate to increase in the next decade. More significantly perhaps, Indian investors have doubled their money over the last 3 years at a time when many have lost money in almost every other market
Organization of Government
India has a parliamentary form of government similar to the English model. The central legislature, i.e. the parliament, is bicameral. It consists of Rajya Sabha (Council of States), which is the upper house, and Lok Sabha, which is the lower house. Members of the Lok Sabha are directly elected by way of adult franchise for a period of five years; whereas election to the Rajya Sabha is indirect, that is, the representatives are not elected through adult franchise by the people. The president and vice-president of India are elected indirectly by a separate electoral college; each holding office for a term of five years. The President, as head of the executive invites the leader of the party commanding parliamentary majority to form the government. The Prime Minister and the cabinet are responsible to the Lok Sabha. The president acts in accordance with the advice of the Council of Ministers. Substantial executive powers therefore rest with the Prime Minister. All legislation must receive the assent of both case of a financial legislation. The constitutionality of legislation and executive acts can be questioned before the courts. The executive makes regulations when a statute requires regulations to be passed for its implementation and administration.
Hub of Global Outsourcing.
Inspired by the Indian IT-ITeS success story, several other locations have been presented as alternate options for offshore outsourcing. However, feedback received from several MNCs having multi-country operations as well as syndicated analyses comparing the various sourcing locations has revealed that India continues to offer and deliver the best ‘bundle’ of benefits sought from global sourcing.
With significant potential still untapped, it is expected that the global sourcing phenomenon will continue to expand in scope, scale and geographic coverage. As global delivery matures, multi-location strategies will become the norm and most sourcing destinations, including emerging locations, will grow in size. Building on its existing strengths, India will remain the leading destination and will continue to play an important role in most global sourcing strategies.
Worldwide spending on IT-ITeS witnessed steady growth in 2005, on the back of healthier spending across key markets of the US and Western Europe, and strong growth in emerging markets. Outsourcing continued to be the primary growth engine with global delivery forming an integral part of the strategies adopted by customers as well as service providers.
The year 2005 also witnessed the coming of age of the Indian IT multinationals, with the traditionally India-centric, indigenous players beginning to build noticeable presence in other locations – through crossborder acquisitions, onshore contract wins and organic growth in other low-cost locations. This was complemented by global majors continuing to significantly ramp-up their offshore delivery capabilities -predominantly in India, vindicating the success of the global delivery model and highlighting India’s increasingly important role in the new world IT order.
In addition to the growth in scale, the portfolio of services sourced globally continued to expand into higher-value, more complex activities- further reinforcing the growing maturity of the global delivery model.
Knowledge Professionals in India
The large and growing pool of skilled professionals has been a key driver of the rapid growth in Indian IT-ITeS. This rapid growth in industry employment has been facilitated by the combination of two fundamental factors
- A favourable demographic profile – The underlying factor highlighting India’s long-term attractiveness is its highly favourable demographic profile. With nearly 60 per cent of its population between the ages 15-59, and more than half below the age of 25. In contrast, countries including the US, Europe, Japan and China have a more aged population with dependency ratios likely to increase over the same period.
- A large, expansive and established network of academic infrastructure – According to data released by the Department of Secondary and Higher Education, Ministry of Human Resource Development, and Government of India
- At the end of March 2005 there were 343 institutes of higher education in India and 16,000 colleges with a total enrollment of 9.3million, producing 441,000 technical graduates.
- Nearly 2.3 million other graduates and over 300,000 post-graduates each year.
Also, with English being a widely accepted medium of instruction in the Indian education system, a large proportion of the graduate pool is proficient in English.