India's economic development, human resources, AI developments, and the sustainability of human cognitive supremacy, in preparation for the Times Global Business Summit 2024:
India has seen remarkable economic growth and development over the past decade. With a population of over 1.3 billion people, India is the world's largest democracy and has emerged as a major economic power. By 2024, India is projected to become the third largest economy in the world in terms of GDP. This growth has been driven by several factors:
Demographic Dividend - India has a large, young population that is well-educated and tech-savvy. Over 65% of Indians are below the age of 35. This demographic dividend offers a major competitive advantage in terms of workforce and consumer market. The expanding middle class with higher disposable incomes will continue to drive domestic consumption.
Services - The services sector has been the major driver of India's economic growth, contributing over 50% of GDP. This includes information technology, business process outsourcing, financial services, tourism and hospitality. India has a strong reputation as a global IT hub and outsourcing destination due to its vast pool of skilled English-speaking workers. The services sector is projected to continue its robust growth as India moves higher up the value chain into areas like analytics, software products, and R&D.
Manufacturing - 'Make in India' initiative has given a boost to manufacturing sector. India has been ramping up domestic manufacturing through schemes like Production Linked Incentives (PLIs). Manufacturing contribution to GDP has been steadily rising. With abundant low-cost labor and growing domestic demand, manufacturing is poised to boom further. Development of industrial clusters and smart cities will aid growth.
Infrastructure - Massive investments are being made into roads, railways, ports, airports and urban infrastructure. The government aims to increase infrastructure spending to $1.4 trillion in the next decade. Efficiency gains from dedicated freight corridors, industrial corridors, Bharatmala and Sagarmala projects will enhance productivity and connectivity. Infrastructure development is critical to sustain high growth rates.
Investments - The government has eased norms to attract foreign capital inflows. FDI inflows have been robust in sectors like services, electronics and automobiles. MNCs are leveraging India as a major investment destination due to its high growth potential. Domestic firms are also ramping up investments and capacity expansion plans. Financial sector reforms have improved credit availability.
Startups - India has the 3rd largest startup ecosystem globally. Supported by factors like expanding internet access, government funds and a young tech-savvy talent pool, startups are thriving across sectors like e-commerce, fintech, edtech, healthtech and more. Startup wave is driving innovation and employment growth. India is on track to have 100 unicorns by 2025.
Reforms - Major reforms like GST introduction, bank recapitalization, bankruptcy code and FDI deregulation have improved the ease of doing business. Privatization of public sector companies and opening up of new sectors will further propel growth. Tax reforms, digitization initiatives, and incentive schemes make India an attractive investment hub.
Demographic Dividend:
- India has one of the youngest populations in the world with a median age of 28 years.
- Over 65% of Indians are below the age of 35 which provides a great source of dynamic and productive workforce.
- It is estimated that India will add over 100 million people to its workforce in the coming decade.
- The government is focused on skilling and educating this young labor pool to make them employable and productive.
- Young population is more adaptive to technological changes and willingness to experiment.
- As disposable incomes rise, youth will drive increased spending and consumption.
- With better healthcare, the dependency ratio will decline, creating a larger share of working population.
- This demographic dividend coupled with sound policies will allow India to reap rich rewards of rapid economic growth.
Make in India:
- Make in India initiative was launched in 2014 to boost domestic manufacturing and promote India as an investment destination.
- It aims to increase the contribution of the manufacturing sector from 15% to 25% of GDP and create 100 million new jobs by 2025.
- Sectors like automobiles, pharmaceuticals, electronics, food processing, textiles, and defense production have benefitted the most.
- Government has enabled policies like relaxed FDI norms, infrastructure development, ease of doing business, and receptive tax rates.
- Production Linked Incentive (PLI) scheme offers incentives for domestic production in sectors like electronics, pharmaceuticals, automobiles etc.
- India has become the world's 2nd largest producer of mobile phones due to PLI schemes.
- Development of industrial corridors, smart cities and mega economic zones to aid manufacturing growth.
Digital India:
- Digital India program aims to transform India into a digitally empowered society and knowledge economy.
- Government is promoting adoption of digital infrastructure, internet connectivity, e-governance, digital payments and more.
- Over 1.3 billion Aadhaar cards and 1 billion mobile connections provide unique digital identity to everyone.
- India is the world's second largest internet market with over 600 million users. Internet penetration still has huge growth potential.
- Government is investing in high-speed fiber optic networks and 5G rollout across India.
- Digital public infrastructure like DIGILocker, UPI, Aadhaar, CoWIN, GSTN spur efficiency and financial inclusion.
- India is emerging as a global hub for digital talent with large number of startups in fields like fintech, edtech, e-commerce etc.
- Digital transformation is driving economic growth and transparency. Eg. Increased tax compliance due to GST system.
- Challenges like cybersecurity threats, privacy concerns and digital divide need proactive governance.
Startup India:
- India has the 3rd largest startup ecosystem with over 60,000 tech startups.
- Government launched Startup India initiative in 2016 to support innovation and entrepreneurship through funding, tax incentives, easy compliance norms etc.
- India ranks 37th on Global Innovation Index and boasts of required talent pool and tech capabilities.
- India has 77 unicorns with total valuation crossing $240 billion. Third highest after US and China.
- By 2025, India is projected to have 100 unicorns and create over 1 million direct jobs.
- Major unicorns are in sectors like e-commerce, fintech, edtech, logistics, food delivery and more. Example Zomato, Paytm, BYJU's, OYO etc.
- Key startup hubs are Bangalore, Delhi NCR and Mumbai with emerging hubs in Chennai, Pune and Hyderabad.
- Government has announced $1 billion Startup India Seed Fund to provide capital and mentoring assistance.
- Supportive ecosystem of incubators, accelerators and angel investors boosts innovative entrepreneurship.
- India offers high growth market opportunity for startups with large addressable consumer base.
- Easing regulations and tax exemptions create positive environment. But concerns around funding winter, inadequate exits and regulatory uncertainty need resolution.
Artificial Intelligence:
- India aims to become a global AI powerhouse with skilled workforce, research capabilities and application across sectors.
- NITI Aayog's National Strategy for AI envisages leveraging AI for economic growth and social inclusion.
- Policy framework is being developed for data protection regulations, ethics oversight, reskilling workforce etc.
- Government has established National AI portal, Centers of Research Excellence and collaborative projects with industry.
- Key application areas are healthcare, education, smart cities, financial inclusion, agriculture, mobility and smart manufacturing.
- India has over 500 AI startups working on innovative solutions. Eg: crop monitoring, fraud detection etc.
- Public and private sector investments in AI are rising. NASSCOM projects the AI market to touch $7.8 billion by 2025.
- India's IT services firms like TCS, Infosys, Wipro are betting big on AI offerings and global partnerships.
- Availability of large data sets, language compatibility and growing digital footprint provide India inherent AI advantages.
- But concerns around job losses, lack of technical expertise, low awareness in society need redressal through skilling programs.
- Balanced approach towards AI adoption while investing in fundamental research is the key.
Sustainability:
- With COP26 pledge, India aims to achieve net zero emissions by 2070 and ensure sustainable development.
- Focus on renewable energy expansion through solar power generation and green hydrogen.
- National Hydrogen Mission launched for meeting climate goals and reducing fossil fuel imports.
- EV policies rolled out to phase out ICE vehicles and boost eco-friendly mobility.
- Government's Perform-Achieve-Trade scheme uses market mechanisms for energy efficiency in industries.
- constructing climate resilient infrastructure to mitigate climate risks.
- Digital and precision agriculture being promoted for optimal resource use efficiency.
- India has the world's largest clean cooking fuel program to reduce indoor pollution.
- Carbon trading platforms and green finance mechanisms being developed.
- Challenges like financing green investments, technology gaps, behavioral change and policy coordination must be addressed.
- India is demonstrating leadership in demonstrating sustainable growth model for developing world.
Macroeconomic overview:
- India's GDP crossed $3 trillion in 2019 making it 5th largest economy. Expected to reach $
Here is the continuation of the overview of India's economic development:
Macroeconomic overview:
- India's GDP crossed $3 trillion in 2019 making it 5th largest economy. Expected to reach $5 trillion by 2026-27.
- GDP growth rate projected to average 7-8% over next decade, highest among major economies.
- Robust domestic consumption with growing middle class and young population will drive growth.
- Services sector contributes over 50% to GVA while industry is around 30%. Agriculture share is reducing.
- FDI inflows have grown rapidly crossing $80 billion in 2021. Signifies rising global confidence.
- Forex reserves stand strong at over $600 billion providing cushion against external shocks.
- Retail inflation targeting by RBI has kept inflation range bound between 2-6% since 2016.
- Current account deficit manageable around 2-3% of GDP. Mitigates external vulnerabilities.
- Fiscal deficit has exceeded 6% since pandemic due to higher spending needs. But expected to decline with growth recovery.
- Reforms like GST, Insolvency Code improved tax compliance and business environment. Ease of Doing Business rank improved to 63.
- Thrust on infrastructure development visible through rising capital expenditure. Critical for growth.
- Concerns around banking sector NPA resolution, enhancing competitiveness and job creation remain.
- Overall, macro fundamentals indicate India is poised for a sustained high growth phase.
Human Resources:
- India's young population offers a huge demographic dividend with about 65% below 35 years.
- Literacy rate has risen to almost 77% according to latest census data.
- Government reforms in education focus on improving access, quality, employability. Eg: New Education Policy.
- Thrust on creating skilling ecosystem through Skill India mission, focus on vocational training.
- Liberal arts and critical thinking also being promoted for holistic development beyond STEM.
- Multiple government schemes provide scholarships/financial aid for affordable education.
- Education sector has majorly gone online since COVID. Edtech penetration is now significant.
- India has one of the largest higher education systems globally with 1000+ universities and colleges.
- But only around 27% of India's youth enroll into higher education indicating gap in access.
- Premier institutes like IITs provide world-class technical education and contribute to innovation.
- India is 3rd largest tech talent provider globally due to high quality engineering education standards.
- STEM graduation rates have improved but still below global average. Focus on emerging tech like AI, machine learning essential.
- Ongoing efforts to internationalize higher education by collaborating with foreign institutes.
- India needs continued investments into human capital and education reforms to fully harness demographic dividend.
Global Economic Outlook:
- As per IMF forecasts, global economy is projected to grow around 4.4% in 2022 after recovering from COVID shocks.
- But growth outlook faces headwinds in form of geo-political tensions, supply disruptions, inflation and financial vulnerabilities across EMDEs.
- Advanced economies expected to grow by 3.9% while emerging markets projected to grow by 4.8% in 2022.
- Inflation has risen multifold across economies due to food and energy supply crunches. Central banks are responding via monetary tightening.
- Global value chains continue to remain constrained affecting productivity and growth.
- IMF recommends policy actions like targeted fiscal spending by governments while central banks tackle inflation.
- Global cooperation essential to reduce economic fragmentation.
- India projected to be amongst fastest growing economies averaging 7-8% annual growth this decade.
- India's growth recovery remains strong relative to global economy. Its services exports and policy stimuli supporting domestic demand.
- But external headwinds risk export demand and wider current account deficit. Needs policy vigil.
- Overall, India remains better positioned to navigate global shocks compared to other major economies.
Overview on India's economic development:
Foreign Policy and Geopolitical environment:
- India's foreign policy is shaped by its positioning as a rising global power and focused on national interests.
- Key tenets include non-alignment, strategic autonomy and multi-alignment.
- Priority on neighborhood diplomacy via regional forums like SAARC, BIMSTEC. But tensions with Pakistan remain a challenge.
- India has strengthened ties with leading powers like US, Japan, EU etc. through trade, defense and strategic cooperation.
- Key role in groupings like Quad, BRICS, G20 highlights India's growing influence.
- Stronger global clout also through climate leadership, humanitarian aid and diaspora outreach.
- 'Act East' policy aims to boost ties with ASEAN, Indo-Pacific nations to tap economic opportunities and enhance maritime security.
- Balancing ties between US and Russia reflects strategic autonomy amidst Ukraine conflict.
- Challenges include border tensions with China, differences with neighbors on regional connectivity projects, and countering terrorism.
- Foreign policy aligns with self-reliance goals via Atmanirbhar Bharat. Prioritizes export promotion.
- Leveraging soft power through films, yoga, cuisine and technology has boosted India's global brand value.
- Vision to play leading role in new frontiers like Indo-Pacific, net zero carbon future, digital economy and resilience against future pandemics.
- Overall, India is poised to become more influential in shaping global governance architecture including UN reforms.
Challenges and Way Forward:
- Despite progress, India's growth journey faces multiple challenges that need strategic interventions:
- Improving human capital through education, healthcare and skilling to fully harness demographic dividend.
- Creating enough employment and bridging skill gaps. Boosting manufacturing competitiveness.
- Bridging digital divide and promoting R&D to foster innovation.
- Mitigating climate change risks and transitioning towards sustainable economy.
- Strengthening institutional capacity for effective service delivery, monitoring and regulation.
- Financial sector reforms for efficient capital allocation and financial inclusion.
- Improving ease of doing business and attracting foreign capital.
- Balancing regional aspirations and managing geopolitics.
- The government's policy vision focuses on integrated development via roads, ports, housing, digital infrastructure as growth enablers.
- Thrust on making India a global manufacturing and innovation hub.
- Progress towards sustainable development balancing growth and environmental needs.
- Leveraging India's digital capabilities and entrepreneurial spirit.
- With continued reforms, investments in human capital and policy stability, India is poised to attain its economic goals and realize its global leadership potential.