India to become Asia’s 2nd Largest Economy by 2030

• 08 Jan 2022

For Prelims: Gross Domestic Product (GDP), Startups, Foreign Direct Investment (FDI), ‘Make in India’, National Policy on Electronics 2019 (NPE 2019)

For Mains: State of India's Economy associated concerns and related steps taken

Why in News

According to the Information Handling Services (IHS) Markit report, India is likely to overtake Japan as Asia’s second-largest economy by 2030.

• Currently, India is the sixth-largest economy, behind the U.S., China, Japan, Germany and the U.K.
• IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.

Note: The size of a nation's overall economy is typically measured by its Gross Domestic Product, or GDP, which is the value of all final goods and services produced within a country in a given year.

Key Points

• GDP Projection:
  • In terms of value, the size of the Indian economy stood at USD 2.7 trillion in 2021, which is projected to grow to USD 8.4 trillion by 2030.
    • This boom is enough to overtake Japan, making India the second largest economy in the Asia-Pacific region by 2030.
  • India’s growth rate is projected to be 8.2% in 2021-22, compared to a decline of 7.3% in the previous fiscal.
  • However, the momentum of the current financial year(FY) will continue in 2022-23 as well and India will achieve 6.7% growth.
• Role of Different Sectors:
  • The manufacturing, infrastructure and services sector along with the e-commerce sector have a big role to play in boosting India’s growth rate.
  • Not only this, due to increasing digitization, the e-commerce market will become bigger in the coming times.
    • According to a report, 1.1 billion Indians will have internet by 2030, in 2020 this number was 500 million.
• Growth Rate:
  • Overall the future of the Indian economy looks strong and stable, making it the fastest growing country in the country for the next decade.
  • In the long term also, technological developments like infrastructure sector and startups will play a big role in sustaining India’s rapid growth rate.
    • Being one of the world’s fastest-growing economies will make India one of the most important long-term growth markets for multinationals in a wide range of industries, including manufacturing industries such as autos, electronics and chemicals, and services industries such as banking, insurance, asset management, healthcare and information technology.
• Middle Class Support:
  • India gets the most help from its vast middle class, which is its main consumer force.
    • Indian consumer spending will also double in the next decade. This could increase from USD1.5 trillion in 2020 to USD3 trillion in 2030.
• FDI Inflows:
  • The large increase in Foreign Direct Investment (FDI) inflows to India that has been evident over the past five years is also continuing with strong momentum in 2020 and 2021.
  • It is being boosted by large inflows of investments from global technology Multinational Companies (MNCs) such as Google and Facebook that are attracted to India's large domestic consumer market.
• Current State of India’s Economy:
  • India’s GDP at current prices stood at USD 694.93 billion in the first quarter of FY22, as per the provisional estimates of gross domestic product for the first quarter of 2021-22.
  • India is the fourth-largest unicorn base in the world with over 21 unicorns collectively valued at USD 73.2 billion.

Government Initiatives for Boosting Economy

• ‘Make in India’ and the National Policy on Electronics 2019 (NPE 2019)
• Production-linked Incentive Scheme (PLI) in Various Sectors
• Major Telecom Sector Reforms:
  • Major telecom sector reforms have been approved in September 2021, which are expected to boost employment, growth, competition, and consumer interests.
  • The rationalisation of adjusted gross revenue, the rationalisation of bank guarantees (BGs), and the encouragement of spectrum sharing are among the key reforms.
• Deep Ocean Mission:
  • The Indian government approved the Deep Ocean Mission (DOM) in August 2021, with a budget outlay of Rs. 4,077 crore (USD 553.82 million) over the next five years.
• Focus on Renewable Sources:
  • In order to generate energy, India is focusing on renewable sources. It plans to achieve 40% of its energy from non-fossil sources by 2030, up from 30% currently, and to increase its renewable energy capacity from to 175 gigatonnes (GW) by 2022.
  • In line with this, India and the United Kingdom jointly launched a ‘Roadmap 2030’ in May 2021 to collaborate and combat climate change by 2030.

Way Forward

• On one hand, the sectors like manufacturing and construction recovered steadily in 2021, on the other hand, low-skilled individuals, women, self-employed people, and small firms were left behind.
• Infrastructure and manufacturing are the two pillars that should be used to push the growth structurally.
  • However, infrastructure building or revival of the investment cycle, in general, would require the private sector to also start contributing.
  • The fundamentals for a revival in private corporate and households’ is emerging with financial institutions, especially banks, in a better position, corporates deleveraging, and a low-interest rate regime.
• The recovery of the Indian economy in FY22 totally depends on how steadily household incomes recover and activity in the informal sector and smaller firms normalise.
• India should also increase ease of business and ease of living to enable the private sector to create wealth over a long period of time.
• Participation of women in the workforce is a key driver of India's growth. Therefore India should increase women's participation in the workforce.

Source: IE