India Economy & Government Initiatives to Boost

S. Thilak, Assistant Professor, SIMS

Introduction

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

Market size

India’s real gross domestic product (GDP) at current prices stood at Rs. 195.86 lakh-crore (US$ 2.71 trillion) in FY21, as per the second advance estimates (SAE) for 2020-21. India needs to increase employability growth rate and has to create 90 million non-farm jobs between 2023 and 2030’s, for productivity and for the growth of the economy. Employment rate has to be increased by 1.5% every year to achieve 8-8.5% GDP growth between 2023 and 2030. India’s foreign exchange reserves stood at US$ 582.04 billion, as of March 12, 2021. This is the Market of the country till FY 2021.

Recent Developments                                                                                 

There have been investments across various sectors of the economy in 2020, the total deal value in India stood at US$ 80 billion across 1,268 transactions and M&A activity contributed 50% to the total transaction value. Private Equity – Venture Capital (PE-VC) sector recorded investments worth US$ 47.6 billion across 921 deals in 2020. Some of the important recent developments in Indian economy are as follows:

• Our country’s overall exports from April 2020 to February 2021 were estimated at US$ 439.64 billion, which has been decreased by 10.14% over the last year. Overall imports from April 2020 to February 2021 were estimated at US$ 447.44 billion which has also decreased by 20.83% over the same period last year.
• Gross tax revenue stood at Rs. 113,143 crore (US$ 15.58 billion) in February 2021, last year it was Rs. 105,361 crore (US$ 14.51 billion).
• Cumulative FDI equity inflows in India stood at US$ 749.39 billion between April 2000 and December 2020.
• India’s Index of Industrial Production (IIP) for January 2021 stood at 135.2, against 136.6 for December 2020.
• Consumer Food Price Index (CFPI) – combined inflation was 3.87% in February 2021, against 1.96% in January 2021.
• Consumer Price Index (CPI) – combined inflation was 5.03% in February 2021, against 4.06% in January 2021.

Government Initiatives

The first Union Budget of the 3^rd decade of 21st century was presented by Minister for Finance & Corporate Affairs, Ms. Nirmala Sitharaman in the Parliament on February 1, 2020.  The budget aimed at stimulating the Indian economy through a combination of short, medium and long-term measures.

In the Union Budget 2021-22, capital expenditure for FY22 is likely to increase by 34.5% at Rs. 5.5 lakh crore (US$ 75.81 billion) over to boost the economy.

In March 2021, the Ministry of Electronics and IT (MeitY) invited applications for the second round of large-scale electronics manufacturing under the production-linked incentive (PLI) scheme. The door to apply for the scheme has been opened until March 31, 2021.

In November 2020, the Government of India announced Rs. 2.65 lakh crore (US$ 36 billion) stimulus package to generate job opportunities and provide liquidity support to various sectors such as tourism, aviation, construction and housing. India’s cabinet approved the production-linked incentives (PLI) scheme to provide ~Rs. 2 trillion (US$ 27 billion) over five years to create jobs and boost production in the country.

The Government of India, under its Make in India initiative, is trying to boost the contribution made by the manufacturing sector with an aim to take it to 25% of the GDP from the current 17%. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy. This creates hope for the boosting up the economy and creating a job will increase the GDP.