India gained its political freedom in 1947, the country truly emerged from the
shackles of stifling bureaucracy and let loose the reigns of economic
development in 1991. With the opening up of key sectors to foreign investment
and end of license raj, India’s growth has continued to contribute
significantly towards the overall growth of South Asia.
in the wake of a stable political regime and a host of economic reforms, it
comes as no surprise that leading institutions such as HSBC and Morgan Stanley are
pegging India to become the third largest economy in the next 10 years while Fitch
estimates India’s GDP growth to be the highest among ten major emerging
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optimistic view is a result of a host of reforms undertaken by the present
government to infuse foreign investment, restructure NPAs in banks, widen tax
base, increase spending on public infrastructure, bring in efficient tax
reforms (GST) and revive manufacturing. The combined effect of these reforms is
expected to offset the temporary hiccups faced as a result of demonetization
and GST, and is likely to result in a growth of 7-8% in the next five years.
stable political setup that rides on the promise of sustained growth is closely
tied to how well a country can achieve its development targets. India is no
exception to this rule and is favorably placed with a stable regime that won with
an absolute majority and started the “Make in India” campaign. This initiative,
targeting both multinational and domestic companies to set up manufacturing
units in India, is geared towards encouraging in-flow of funds. In view of
this, government has made sustained efforts to improve the business climate. India’s
ranking on “World Bank ease of doing business report 2018” rose to
100 from130 in 2017. The government also recently liberalized rules for FDI in
single brand retail, power exchanges and construction.
Capital into PSBs to encourage lending
recent months, government has announced plans to infuse nearly Rs. 2.1 lakh
crore capital into PSBs over a period of two years, a move that is likely to unlock
lending for private investments.
tax reforms to increase tax base
much-awaited Goods & Services Tax (GST), rolled out in July 2017, with a
view to introduce a uniform tax system and expand tax base, is expected to
improve the business environment fostering both employment and innovation. Though
the country did face initial hiccups with businesses trying to adjust to the
new reforms, GST is likely to have a positive effect on India’s growth by bringing
many informal businesses under the purview of formal sector.
Spending on Public Infrastructure
has continued to announce a series of infrastructure projects related to building
roads, smart cities along with a slew of housing programs. This is likely to
drive growth through increased public spending and providing infrastructure for
companies to flourish in.
these reforms are likely to push India towards an accelerated pace of growth,
one must not throw caution to the wind. For India to wake up to its full potential,
the government still needs to address key concerns related to corruption, ease
of getting construction permits, registering property and income inequality. Not
to mention the growing trade deficit and the abysmally low investments in
education and healthcare.
will prove to be an economic juggernaut given the truly positive impact that
the new reforms are likely to have on the economy and under the present regime,
the pace of reforms is likely to continue leading to impressive growth of 7-8%
in the next 5 years.