India’s star is in the ascendancy. Uniquely among the four BRIC nations, India’s economy has remained relatively unscathed by the collapse of oil prices and other geopolitical factors that have undermined investor confidence in most of its rivals.
India is now officially the world’s fastest growing major economy overtaking its Asian rival China last year, according to the International Monetary Fund.
The Indian economy expanded 7.3 percent year-on-year in the last three months of 2015, slowing from an upwardly revised 7.7 percent growth in the previous quarter, but well in line with market expectations. Significantly the manufacturing sector, spurred on by India’s growing middle class and expanding domestic consumption, surged 12.6 percent, while farm output shrank 1 percent.
Confidence in India’s future as an emerging economic superpower is reflected in the markets and foreign direct investment. India’s equities and bonds are favorites with emerging market investors who are betting that growth will accelerate further. Meanwhile direct bricks-and-mortar foreign investment flows into India jumped 75 per cent in 2015, according to a report from the United Nations trade body UNCTAD.
Optimism about the world’s fastest growing economy comes as Prime Minister Narendra Modi is pushing ahead with his plans to use technology to help address some of India’s most pressing infrastructure and societal problems including rapid urbanization, skill development, digital inclusion and governance.
Of course there have been similar initiatives in the past, but based on some of the conversations at the World Economic Forum in Davos earlier this year, there appears to be a renewed confidence among Indian business and political leaders that this time it is both real and justified.
India Finance Minister, Arun Jaitley, led the 140-plus strong India contingent at Davos this year accompanied by some of India’s most prominent business leaders, including Sunil Bharti Mittal, the telecommunications business leader. Mittal told a Davos panel, “India will be a shining star, the I in the BRICs constellation is giving hope to the rest of the world that we won’t fall in the same trap that most of the world is in, that of slow growth.”
Meanwhile a recent PWC survey of more than 1,400 global CEOs found India to be the
rare bright spot among big economies, with rising confidence in short-term sales growth. But India still has plenty of challenges.
With 65% of the population still living in rural areas, many of the issues revolve around social and financial inclusion, growing digital divide and the need for an enabling digital infrastructure. In addition, as a recent article in The Hindu newspaper noted, key land and tax reforms remain elusive and the latest data, showing a 15 percent year-on-year decline in exports, suggests that India cannot totally escape the fallout of a global slowdown stemming from China.
Critics also note India ranked 130th in the World Bank’s latest survey on ease of doing while business leaders complain that India bureaucracy and red tape still stymie new investment. In some cases they claim that approval processes that take just weeks in countries like Hungary or Poland can take a year or more in India.
Nevertheless, despite these and other problems, India, with 800 million customers, is an economy that most companies – international and domestic – can’t afford to ignore. By the end of this decade, India will also have the youngest population creating new business and investment opportunities while the growth of major cities and connected devices will mandate the use of smart city technologies and IoT.
Prime Minister Modi’s Digital India initiative envisages providing broadband highways, mobile access to every citizen in this country and creating a National Information Infrastructure.
In doing so, India has the opportunity to leapfrog generations of old and less efficient technologies and capitalize on the latest technology tools including cloud computing, advanced big data analytics, IoT, mobility and social.
Whether or not it succeeds will depend in some part on the willingness of technology companies, domestic and international, to play their part in driving the true Digital Dividend for India.