India’s economy is posting the fastest growth among major economies putting it on track to become the world’s third largest before the end of the decade, according to financial forecasts.
As companies record strong growth and hand out pay hikes, there is a wave of optimism among professionals.
“There are good projections for the Indian economy. Plus, even in our friends’ circle, a lot of people are changing jobs, moving to better pastures. For us also, my wife, has switched recently to a new job,” said Jaideep Manchanda, a marketing professional in New Delhi who recently bought a new car.
Consumers like Manchanda and his wife, Tanya Tandon, are driving domestic demand as India emerges strongly from the COVID-19 pandemic — the automobile industry for example recorded its highest-ever sales in November. New investment is flowing into the country, helping it withstand the trend of slowing growth in most countries.
India is expected to grow by nearly 7% this year despite the economic turbulence created by Russia’s war in Ukraine. That momentum is likely to continue, helping it overtake Japan and Germany to become the world’s third-largest economy, according to a recent forecast by New York-based investment firm Morgan Stanley and S&P Global.
The International Monetary Fund projects India to reach that position by 2028. The United States and China are the world’s biggest economies.
The World Bank’s latest report on the Indian economy released in December also said that India is relatively well positioned to weather global headwinds compared to most other emerging markets.
“India’s economy has been remarkably resilient to the deteriorating external environment,” Auguste Tano Kouame, World Bank’s country director, said releasing the report “Navigating the Storm” earlier this month.
India’s economy is relatively insulated partly because it has a large domestic market and is relatively less exposed to international trade, according to the World Bank.
Growth is expected to dip in the coming year as, like many other countries, India grapples with inflation following a surge in global food and fuel prices. A potential global recession also poses a risk to its economic momentum.
However, that is not dampening optimism. “Even if the economy grows consistently at around five and a half or 6% will be remarkable,” according to Abhijit Mukhopadhyay, an economist at the Observer Research Foundation in New Delhi. “A lot of changes are happening across the world, and we hope that some of them will be beneficial for the Indian economy.”
New opportunities are opening for India as trade and geopolitical tensions between China and the United States deepen, analysists say.
For decades, global investors flocked to China to set up factories while India’s manufacturing sector lagged, holding back the economy. Efforts by Prime Minister Narendra Modi to promote a “Make in India” campaign since he took office eight years ago had met with a tepid response, but that could be changing.
On a visit to New Delhi last month United States Treasury Secretary Janet Yellen spoke of building closer economic ties with India.
“The United States is pursuing an approach called friend-shoring to diversify away from countries that present geopolitical and security risks to our supply chain. To do so we are proactively deepening economic integration with trusted trading partners like India,” Yellen said addressing technology leaders at a Microsoft facility.
Analysts say that many companies are looking at India as they consider adding production capacity in a second nation besides China.
The U.S.-based tech company Apple is expected to move some iPhone manufacturing to India and scale it up over the next three years. Taiwanese electronic company Foxconn and local conglomerate Vedanta have announced a $19.5 billion investment to make semiconductors in the western Indian state of Gujarat.
“Now, after China, India is probably being seen as the next place where growth will come. This is the expectation, and the initial signs are already there,” points out economist Mukhopadhyay. “That is why a lot of global investment, direct investment and a lot of global financial capital are now betting on India.”
Modi’s government is making efforts to lure companies by offering incentives for producing in India and investing billions of dollars in improving the country’s creaky infrastructure that has long deterred investors.
The mood is upbeat among Indian professionals, who often looked overseas for career opportunities. Now many feel they are better off at home, especially after the tens of thousands of layoffs by leading technology companies in the United States that have impacted many Indians.
“India has great potential across the sectors, across geographies, and across small and bigger cities,” said Tanya Tandon, a marketing professional.
Maintaining high growth will be vital for India, a country of 1.4 billion people, which still needs to lift millions out of poverty and also faces a massive challenge in creating jobs for its huge, young population.