What Next in Indias Growth Story?
Published on : Friday 31-07-2020
Navoch Mohanayak, Director, and Lakshmi Narasimhan, Senior Consulting Analyst, GrowthImplementation Solutions Practice, Frost and Sullivan.
During the India Ideas Challenge summit hosted by the US-India Business Council, the Indian Prime Minister addressed the countrys position as a safe and reliable trading partner post-Covid- 19. With all eyes on Indias ability to rise to the challenge, the PM highlighted India as a land of openness and emerging opportunities. We present some of the key sectors highlighted in the PM's speech that we expect to ride this wave of growing optimism in India's growth story.
Large Population Providing Huge Scope for IT Penetration
India has been one of the top contributors to the global IT sector with nearly 500 million users actively using the internet, as per the Internet and Mobile Association of India's (IAMAI) Digital in India Report. The potential for cross-selling products to a connected ecosystem of 1.35 billion people in this digital marketplace would be enticing. Fin-tech and E-commerce are likely to gain more prominence as India transitions towards a cashless economy and more Indians enter the workforce. Given the security challenges, a strong policy on technology is the need of the hour.
Large Population Providing Huge Scope for IT Penetration
India has been one of the top contributors to the global IT sector with nearly 500 million users actively using the internet, as per the Internet and Mobile Association of Indias (IAMAI) Digital in India Report. The potential for cross-selling products to a connected ecosystem of 1.35 billion people in this digital marketplace would be enticing. Fin-tech and E-commerce are likely to gain more prominence as India transitions towards a cashless economy and more Indians enter the workforce. Given the security challenges, a strong policy on technology is the need of the hour.
An Abundance of Opportunities in Agriculture
The pandemic has once again highlighted the importance of the agrarian economy. Several opportunities exist along the value chain in the areas of farm management, logistics, agricultural machinery, fisheries, and food processing. Despite a large food production base, the level of food processing is very low in India. There is a need for India to move up the value chain as India's agriculture exports consist of mainly raw materials. Increasing investments in infrastructure facilities, the use of modern technology, and promoting food security will position India as a preferred investment destination for the food processing sector, which is expected to be worth half a trillion dollars by 2025, according to Invest India.
Will Healthcare of the 2020s be the IT sector of the 2000s for India?
The pandemic has exposed the limitations of healthcare systems worldwide. With the increasing number of COVID cases, the hospitals' capacity has been severely put to test. The pandemic could be the critical breakpoint that was needed for India to revamp its healthcare delivery system. Despite the constraints, Indias medical equipment manufacturing industry has risen to the challenge and is one of the success stories of the pandemic. Going forward, increasing the investment in equipment & medical facilities in public hospitals and further impetus on domestic manufacturing could be the key growth drivers. The pharmaceutical industry in India has been an active player in ensuring that the drugs reach the different parts of the world in record time. There is also an opportunity for India to reduce its reliance on Chinese APIs.
Clean Energy New India
India has been making steady progress in its transition towards a gas-based economy. Recent investments in solar and wind projects are steps in the right direction towards Indias adoption of clean energy sources. With an ambitious target of achieving 450 GW of renewable energy by 2030, expect this sector to see rapid scaling up of capacity. Worsening air quality and concerns over global warming will tip the balance in favour of clean fuels.
One Giant Leap for Indian Aviation
With rising standards of living, passenger traffic is expected to nearly double in 10 years, according to Frost and Sullivan's analysis. Given the huge demand and growth potential, India remains well-positioned to become a critical part of the aircraft manufacturing supply chain, provided it takes appropriate measures to Make in India attractive. Recent decisions to favour setting up of Aircraft Maintenance, Repair and Overhaul (MRO) facilities in India are a step in the right direction. In the short term, the government needs to ensure airlines remain sustainable.
Strong Defense and Space Capabilities
The governments recent decision to increase the FDI limit in defense from 49% to 74% is a shot in the arm for Indias defense sector. The focus on local investment in defense production and restriction of imports will go a long way in Indias path to self-reliance in defense. Going forward, the space sector should see considerable traction with the private sector allowed to participate in the entire range of activities.
The Big Infra Push
National Infrastructure Pipeline launched recently aims to enhance Indias infrastructure and help India become a 5 trillion economy by 2025. Improved road connectivity to remote areas, expressways, industrial road corridors have been planned to upgrade the existing infrastructure. The government has planned to increase the share of rail freight to 50% in 2030 with the introduction of dedicated rail freight corridors and multi-modal transport network. The development of inland waterways and up-gradation of ports will boost the maritime infrastructure. Housing for all and piped water connections to households are the key focus areas in India's infrastructure push.
Digital Technology to Drive Financial Inclusion
The government's push towards financial inclusion and emphasis on digitisation would immensely benefit the rural population. Ease of making digital payments and local-language based mobile applications could accelerate adoption in rural areas. Microfinance institutions can leverage digital banking to mobilise savings and deposits. There is a huge opportunity for lenders to monitor the repayments, effective utilisation of the loans, and provide customer-specific offerings in digital-enabled microfinance products.
Covid-19 has reshaped the global order and has placed India as one of the top alternatives to China-based global supply chains. India's efforts to reform its sectors have already started to bear fruit. Stability in decision making, transparent processes, and adopting flexible policy positions that support business activity remain key in converting these growth opportunities.
