Indian economy and its growth projection

1. Indian Economy and Its
Role in World Economy in
2030
By- Harsha Maloo 3/18/19 Economics

2. 1
TABLE OF CONTENTS
INTRODUCTION ......................................................................................................................................................2
BACKGROUND.....................................................................................................................................................2
HISTORY OF INDIAN ECONOMY..............................................................................................................................3
FACTORS PROJECTING GROWTH OF INDIA IN 2030 AND THEIR IMPACT TO WORLD............................................4
RISING INDEX OF INDUSTRIAL PRODUCTION (IIP) ..............................................................................................4
MANUFACTURING- MAKE IN INDIA....................................................................................................................4
ENTREPRENEURSHIP...........................................................................................................................................5
FOREIGN DIRECT INVESTMENT...........................................................................................................................5
INFORMATION TECHNOLOGY SECTOR ...............................................................................................................5
YOUNG WORKFORCE..........................................................................................................................................6
GROWING HIGHER EDUCATION .........................................................................................................................7
ADEQUATE SAVINGS AND INVESTMENTS...........................................................................................................7
STATE (PROVINCE) INITIATIVES ..........................................................................................................................7
OTHER AREAS .....................................................................................................................................................8
CONCLUSION ..........................................................................................................................................................9
BIBLOGRAPHY.........................................................................................................................................................9

3. 2
INTRODUCTION
BACKGROUND
Twenty-five years ago, in 1993, India commenced on liberalization journey and opened its doors to
global economic powers. The world since then, has watched the fast stridden economic growth and
reduced poverty in country.
Today India has become the fastest growing economy of the world and is moving with a rapid rate of 7
percent in GDP which is much greater than the average of 3 percent growth rate of the world.
As per economists, India will become the largest economy in the Commonwealth in 2019, when it will
overtake the British economy.
By 2030 India is projected to become a $10- trillion economy. Today India is already in top 3 in PPP
(purchasing power parity). Research all over world predict that by 2030, India could be the rising
economic powerhouse of the world as China is seen currently. As the world’s leading economic power,
China is expected to remain ahead of India but the gap between the two economies may begin to close
by 2030. The research projection also says that India could even overtake the Communist-giant in the
second half of the century.
Figure: OCED Data, The size of bubble indicates the size of economy. The top 5 projected economy in 2030 are marked with their size in
Trillion US dollar
Although India is on the verge of a ‘golden age’ in terms of its economic clout in the global economy,
but aspirations of achieving high standard of living comparable to those in high-income countries is still

4. 3
a long way from being fulfilled. An average growth in the population in India is four times that of the
rich group of countries, hence the income per capita in the developed economies will be four times
more than in India.
Figure: Per Capita income projection in 2030
HISTORY OF INDIAN ECONOMY
Indian economy was historically one of the most significant economies of the world. During 17th
century, Indian economy occupied 27% of global economy. However, it declined thereafter just to 3%
post the British colonisation era.
Prior to British colonisation, the country remained the largest exporter of processed goods. But during
the period between 1780 to 1860, India changed from being the largest exporter of processed good to
largest exporter of raw material and buyer of processed goods. In 19th
century, Britain replaced India
and became the world’s largest textile manufacturer. This lead to gradual fall in economy of country.
Figure : History of Indian Economy (Source: Wiki -Economy of India)
66000
9000
4500
14000
0
10000
20000
30000
40000
50000
60000
70000
Per Capita
InUSDollar
Per Capita Income in 2030
United States China India World Average

5. 4
However today, after 70 years of independence, India’s nominal GDP in absolute number has grown
to 2.439 trillion US dollar. India has again marked its position as the 6th
largest producer of good and
services in the world i.e. 6th
position in world by GDP in nominal terms.
FACTORS PROJECTING GROWTH OF INDIA IN 2030 AND THEIR IMPACT TO WORLD
RISING INDEX OF INDUSTRIAL PRODUCTION (IIP)
India is the 3rd
largest producer of steel and 2nd
largest producer of cement globally. Steel and cement
industry forms an imperative part of Indian economy, generating a large number of employment
opportunities. The country is also home to prominent companies in pharmaceutical, steel, cement and
space technology etc. The country has marked its position in top five pharmaceutical markets in the
world and is giving a very tough competition to the United States.
Industries form an essential sector in Indian economy. It gives a platform for strong and sustainable
growth of the country. To increase the competitiveness in the market, India is working towards
improving its manufacturing sector which will directly reflect on its exports and will make India’s
presence strong in global market.
India is projected to move from 14th
largest exporter of goods and services to 5th
largest. Countries like
UK and Europe, having intensive trade links with India, will benefit by growing trade in India. With the
growth of country, the quality of exports is expected to rise, benefitting most to the trading partners
of India
MANUFACTURING- MAKE IN INDIA
Indian government is putting lot of emphasis on developing entrepreneurship and expansion in
manufacturing sector by introducing schemes like ‘Make in India’ (encouraging multi-national, as well
as national companies to manufacture their products in India). Reason for such strong emphasis on
manufacturing in India is to flourish the domestic market which will contribute towards strength of
national economy. Make in India initiative was launched on September, 2014 and it aimed to increase
the contribution of manufacturing sector to India’s GDP to 25% from current 15% and also generate
employment.
India targets to increase its competitiveness with big manufacturing giants of the world. India believes
it has a lot of intact potential in terms of human resource and infrastructure which, when properly
utilized, will propel India into an industrial hub and will lead into low cost manufacturing for world.

6. 5
ENTREPRENEURSHIP
The start-up ecosystem is at its peak in India. Government of India has launched an initiative
“Startupindia” (#startupindia, 2018) which aims at promoting bank financing for start-up ventures to
boost entrepreneurship and encourage job creation.
So far, 6,096 Start-up applications have been recognised as Start-ups by DIPP (Department of Industrial
Policy and Promotion). 74 Start-ups have been approved for availing tax benefits by IMB (Inter
Ministerial Board, setup by DIPP), as of 1st
week of Jan, 2018. Startup India hub has been able to handle
more than 77,000 queries and facilitate more than 450 Start-ups by providing advisory on business
plans, pitching support, etc. Start-ups can now avail income tax exemption for 3 years in a block of 7
years, if incorporated after 1st April 2016. A 'fund of funds' of INR 1.54 billion US dollar is being managed
by SIDBI (Small Industrial Development Bank of India). 93.17 million US dollar have been committed to
17 AIFs (Alternative Investment Funds) and 75 Start-ups have been funded. (#startupindia, 2018)
This initiative by government will increase the employment opportunities in India and its ripple effect
will be seen across the world. Few example of Indian tech entrepreneurship which are now expanding
across the globe are – Mysys Technologies, RxPrism, I-Exceed etc. To improve and contribute to overall
economic development of world, Job market needs to keep up with the rising working population.
FOREIGN DIRECT INVESTMENT
India has already become the highest-attracting Foreign Direct Investment (FDI) destination worldwide
since 2016, ensuring capital investments in six new industrial corridors and 100 smart cities being
planned around these corridors. Government has eased the restrictions for foreign investors, opening
nearly 90 percent of country’s industrial base including the defence sector and railway base. FDI grew
by 37 percent during the 1st
quarter of 2017.
The inflow of FDI will reinforce INR value against other major currencies. It will increase the country’s
financial account surplus which will ultimately improve balance of payment (BoP). And with the rise in
currency of India, there will be direct impact on global trade.
INFORMATION TECHNOLOGY SECTOR
IT sector contributes $160 billion in revenue. 60 percent of outsourcing from United States is done to
India. Information Technology employees approximately 2.8 million people directly and around 8.9
million people indirectly. Indian I.T. companies are among the top 10 technology companies in the

7. 6
world. The I.T. sector (export and domestic revenue) has increased its contribution to India’s GDP from
1.2% in 1998 to 13% in 2017.
Indian domestic IT market will offers strong prospects for industry growth even if global markets will
face challenges. And as conventional economics say, technology drives a country’s economy. Hence in
coming years Information Technology sector will boost the foreign exchange reserve and exports of
country.
YOUNG WORKFORCE
“By 2020, the average age in India will be 29 years, Europe at 45 years, China at 35 years, and the US
at 31 years. India will be the youngest country in the world with a sizable working population”, said by
Mohandas Pai (Chairman of Manipal university and former director on Infosys) (Kashyap, 2017).
According to a report, the total size of the Chinese working-age is declining rapidly leaving the country
worrisome. United Nations projects that the number of Chinese above the age of 65 will increase by
85% in 2030. This will create a burden on the working force of China who will have to pay for the non-
working population either directly or through taxes. In contrast with above, India’s working-age
population is unlikely to peak until about 2050.
To fully reap the benefits of this demographic dividend, India will have to increase its expenditure on
education and developing skills in its large young population, as a percentage of its GDP.
Figure: Working population projection in 2030 Figure: Population projection in 2030
India’s favourable demography will push up the hours worked and productivity components and hence
will give the country an edge over the world in service and manufacturing industries.
Countries which are rapidly ageing will face a lot of pressure in coming years. The current trends
indicate, East Asia and Europe are facing the most pressure due to rapid decline in working age
7.1
1.5
Total Population in Billion
Rest of the world India

8. 7
population. These countries will need to open their doors and promote immigration from countries like
India whose working population is growing, as oppose to most countries in the world. For low WAP
(working age population) countries to survive in this fast-paced world, they will need to work on
increasing productivity and healthcare of the people so that the retirement age can be raised.
GROWING HIGHER EDUCATION
“Mohandas Pai( Chairman of Manipal university and former director on Infosys) says, India has 800
universities, 51,000 colleges and 35 million young people in college. Close to 8 million graduates pass
out of colleges every year. India produce one of the largest number of professionals - over 50,000
doctors pass out every year. By 2030, there will be close to 70 million young people in colleges, making
it the largest college going population in the world”. (Kashyap, 2017).
Education is one of the most important factor for the success of a country’s economy. Well trained
workers tend to produce more and earn more money resulting in better economy of country. Hence
due to continuous efforts taken by India’s education system, the country will have competitive
advantage over the world.
ADEQUATE SAVINGS AND INVESTMENTS
India is on the path of trading off the short term expenses to get long term investments. As per the
World bank report, “Among the developing countries, China and India are expected to be the largest
global investors. The two countries together will account for 38% of the global gross investment by
2030” (The World Bank,2013). The growth in education and training, young workforce, rising
population and improved health of people will support the investment opportunities in India.
Close to 68 percent of savings in India are contributed by households. With the rapid rise in
population, the savings in India will also show a sharp rise. As per the world bank report, until 2030,
savings in India will increase at an average rate of 32 percent annually. And by 2030, India’s
contribution to global savings will be 7 percent.
Hence the future shows that Indian investment would rise in both developed and developing countries
leading to growth of those countries. And due to the bulk savings , India will have enough resources
required to finance the future development of country.
STATE (PROVINCE) INITIATIVES

9. 8
Another noteworthy point is that different states (provinces) in India are also getting actively involved
in creating infrastructure and attracting investment & business in their respective states. Many state
governments like Gujarat, Karnataka, Himachal Pradesh, Andhra Pradesh, and Maharashtra are actively
seeking for investment and trying various methods to attract businesses in their states.
By 2030, India is expecting to create a
minimum of one smart city per state and
a maximum of 100 smart cities overall in
the country. As most states in India are
carrying out different initiatives for their
own development, which is prominent for
the growth of country as a whole.
Central government is supporting these
initiatives largely by funding.
The state initiatives also focus majorly on making India a carbon free country. It is anticipated that by
2030, India will strive to get 50 percent of its energy from renewable sources. Hence these initiatives
are leading towards an overall responsible and sustainable growth of country.
OTHER AREAS
The maritime industry is the most crucial industry for trade and commerce in India. 95 percent of total
trade happens via marine route. A roadmap has been prepared to increase India’s port capacity to
3500+ MMTPA (Million metric ton per annum) from 1500 MMTPA by 2030. This will significantly
increase the trade of India with rest of the world`
Power sector in India, presently has the fifth largest electricity generation capacity in the world. Besides,
there is a potential of foreign investment of 223.67 billion US dollar in India’s power sector, in coming
10 years which will help this sector to increase the generation, transmission and distribution of power.

10. 9
CONCLUSION
India’s economic success in 2030 will make Asia as the fastest emerging region in the world. By 2030,
India is expected to contribute 15% to global economic growth
With the accelerating economic growth in India along with
growing population, the demand for goods and service will far
exceed the current expectation. This will remarkably catalyse
the global growth. With the rising middle income population,
the country will become good consumer, leading to increase in
imports and creating jobs in world which will directly impact
world economy.
According to a World Bank study, “there is scope for India to
expand its trade significantly without hurting development
prospects of most other economies” (Winter and Yusuf,
2007). As India grows and displace other countries in market for high-tech products, however, it would
create space for other countries to increase production of agriculture and a large number of services.
With all the above said, India will still have to be resilient and fight a long way to improve the standard
of living for people of the country, which when done, will be the real victory for the people of India.
BIBLOGRAPHY
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5. Information Technology in India. (2018). Retrieved from
https://en.wikipedia.org/wiki/Information_technology_in_India
Figure: GDP by PPP ranking in 2014 and 2030

11. 10
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