| 10 | INDIAN ECONOMY The Indian economy has travelled a long way from the relative isolation of the 1970s and 1980s to becoming a crucial part of the world economy and the global financial system. While India’s economic and financial integration with the world formally started with the 1991 economic reforms, the process has gathered pace in recent years. The government is actively promoting India as a sourcing hub for multinationals across sectors with policies like Make in India, Production Linked Incentive (PLI) Scheme for investors in key manufacturing sectors such as electronics, electric vehicles, textile and garments, solar modules and semiconductors among others. These policies have started to bear fruit. In the last financial year, India overtook the United Kingdom to become the world’s fifth-largest economy with a Gross Domestic Product of nearly US$3.2 trillion. At its current pace of growth, India may well become the fourth-biggest economy globally in the next few years. This presents one of the biggest growth opportunities for global investors and multinational corporations. India received nearly $87 billion worth of foreign capital in FY21, making it one of the most popular destinations for global investors Going from strength to strength India is also one of the world’s top manufacturing and trading nations. It looks set to further increase its global footprint as an ever-growing number of multinationals select India as a manufacturing destination in line with the China-Plus-One global sourcing strategy. According to an analysis by CRISIL, foreign trade was the fastest-growing component of India’s gross domestic product (GDP) in FY22 with both merchandise exports and imports reaching record highs. India’s participation in global trade is expected to increase further with the roll-out of the PLI scheme. Importantly, the government policy of encouraging the world’s top companies to set up manufacturing operations in the country through a slew of incentives and tax breaks under the PLI Scheme has strengthened India’s position as a manufacturing hub and boosted Prime Minister Narendra Modi’s ‘Make in India’ initiative. In the last few years, some of the world’s top companies such as Apple, Samsung, Foxconn and Xiaomi among others have set up world-class manufacturing operations in India. | 11 | Thanks to these efforts, India is one of the biggest manufacturers of mobile phones in the world. Also, electronics are now one of the biggest and fastestgrowing exports from the country. The technologies being brought to India by multinationals are generating new employment opportunities here. “India is becoming a manufacturing hub. It is building a foundation for a self-reliant India. Be it manufacturing of electronic goods or mobile phones, today the country is progressing at a very fast pace,” Mr Modi said. In 2022, the Indian government approved a $10 billion PLI Scheme to encourage semiconductor and display manufacturing in the country. The scheme has got moving with India’s top business groups announcing plans to invest billions of dollars in electronic chip manufacturing plants. At this rate, India is on course to become one of the top manufacturing and sourcing hubs in Asia for semiconductors and electronics products and components. India’s Commerce Minister Piyush Goyal has announced an ambitious target of achieving $2 trillion in exports by 2030 and $7.5 trillion by 2047. This requires 20% annual growth in exports for the next decade. “It’s time to take exports to the next level,” Mr Goyal said. To achieve this target, India is energetically embarking on a series of trade agreements for boosting exports, removing barriers for skilled Indian professionals and secure imports of essential raw materials for manufacturing growth. New trade agreements signed with Australia, the UAE and soon with the UK will be templates for more to come. Foreign trade plays a much bigger role in the Indian economy than in many other large emerging and advanced economies including China, the United States, Brazil, Indonesia and Japan among others. During the fiscal year ending March 2022 (FY 202122), India’s merchandise exports reached a record high of US$422 billion, up 44.6% from $291.8 billion in FY20-21. India earned another $257.7 billion from services exports, taking the total exports to an all-time high of nearly $680 billion. Foreign trade was equivalent to nearly 45% of India’s Gross Domestic Product in FY22, up from 38% a year ago, underlining its increasing ties. The comparative ratio for China was around 38%, while it was 26% in the case of the United States, the world’s largest economy. Other countries that lag behind India in this regard include Japan (37.7%), Brazil (38.2%) and Indonesia (39.1%). India is also a global leader in software and services export. According to the United Nations Conference on Trade and Development (UNCTAD), India is the biggest exporter of ICT-enabled services among emerging markets with total export revenue at nearly $82 billion in CY21, which is only second to Ireland that tops the list at $198 billion. India’s export of ICTenabled services is growing at 12-15% per annum, making India a keystone member of the global technology ecosystem. India also plays an active role in global capital flows and Indian equity is now one of the biggest in the world. According to data from UNCTAD, India was the seventh-biggest recipient of foreign direct investment (FDI) in CY21 at US$44.7 billion. Including investment by foreign portfolio investors (FPIs) and capital raising by Indian companies, the country received nearly $87 billion worth of foreign capital in FY21, according to data from the Reserve Bank of India, making India one of the most popular destinations for global investors among the emerging markets. India has already signed 13 Free Trade Agreements (FTAs) with its trading partners that include the world’s major economies such as Japan, Australia, United Arab Emirates, South Korea, Singapore, Thailand and Malaysia among others. India is also negotiating FTAs with the United Kingdom, European Union and New Zealand. All these are set to make India an even bigger and more important member of the global economy in the coming years. • India is becoming a manufacturing hub. It is building a foundation for a self-reliant India. Be it manufacturing of electronic goods or mobile phones, today the country is progressing at a very fast pace” Narendra Modi Prime Minister of India
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