S&P Global Market Intelligence has found that, for India to meet its growth potential in the coming years, the country must leverage its strong and growing labour force, hone in on the growth of its global manufacturing exports, and lean into the boom in local fintech startups.
The findings are part of the latest edition of S&P Global’s Look Forward Journal, which shines the spotlight on India and its potential over the coming decade as the country contends with multiple overlapping transitions. Contributions from S&P Global Market Intelligence analysts and research leaders focus on demographic dividend, capital markets potential, digital and physical infrastructure, supply chain and geopolitical shocks.
“India’s path to becoming a more influential global actor will be determined by how effectively it can manage its federalism balancing act and mobilise the participation of grassroots interests,” says Deepa Kumar, head of Asia-Pacific country risk at S&P Global Market Intelligence.
“Mutual support and coordination across cities, states and the central government will be necessary if India is to fulfill its ambition of becoming a global manufacturing hub as well as realising its goals in energy transition and agriculture.”
Key highlights include:
* India’s short-term economic growth will stand on the shoulders of its 678,6-million strong labor force, as estimated by S&P Global Market Intelligence, but labor market reforms could help to unlock sustainable long-term growth. Skill development will help shift India’s economic focus to manufacturing. The lower skill level in Indian manufacturing means that each employee added just $8 076 of value on average in 2021, according to S&P Global Market Intelligence. That’s far behind the $18 308 achieved in Thailand and the $34 402 seen in Malaysia.
* India’s realised – and unrealised – potential over the next decade will be a story about the successes and opportunities of its diverse states. S&P Global Market Intelligence estimates Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh will be India’s top five growing states over the coming decade (nominal by state). Maharashtra GDP is expected to reach $824,51-billion and Tamil Nadu is forecast to reach %650,34-billion – both by 2030.
* India has an immense opportunity to increase its share of global manufacturing exports, and the government is seeking to raise manufacturing to 25% of GDP from 17,7% by 2025. India’s policy interventions in the smartphone sector illustrate its ambitions for manufacturing as a conduit to service the domestic market as well as its geopolitical aims. India’s export industry for telecom equipment, including smartphones, is rapidly expanding. Exports reached $11,8-billion in the 12 months to31 March 2023, data from S&P Global Market Intelligence shows.
* Higher foreign participation in India’s domestic government debt market would increase demand and meaningfully lower the cost of new government debt issuance. S&P Global Market Intelligence’s Banking Risk Service forecasts credit expansion growth to average 13% annually from 2023 to 2030 due to fast economic growth and banks strengthening following the recent large-scale bad loan write-off.
* Although the global technology market decelerated recently, India’s startup ecosystem continues to enjoy tailwinds. As a result, the share of global venture capital flowing into Indian startups may roughly double by 2030. India emerged as the fourth-most popular destination for startups in the world in 2022, attracting 4,2% of global venture capital, behind the US (41%), mainland China (18%) and the UK (6%), according to S&P Global Market Intelligence.