A sigh of relief to Indian citizens given by the International Monetary Fund (IMF) about a turnaround in India’s economic situation in the year 2021-22. The IMF stated the growth of 1.9 per cent in the Gross Domestic Product, the highest among the G-20 nations. The G-20 is made up of 19 countries and the European Union. The 19 countries are as follows: Argentina, Australia, Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, the Russian Federation, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States.
Economists around the world project a world economic problem due to the current Covid-19 situation. The United States of America, a G-20 country, also faced a severe blow due to loss of 701,000 jobs as of March 2020. According to a report by Bank of Italy, the economic situation of the G-20 country dropped by 5 per cent even before the pandemic lockdown hit the country at large. The National Institute of Economic and Social Research (NIESR) had stated that the economic downturn of the United Kingdom, again a G-20 country, will be a “once in a century event”. The largest and tightest squeeze of economic activities since 1921 was projected for the UK in early April. It is reported that the world would face a recession situation with more adverse challenges as compared to the Great Depression.
India’s positive economy in 2021-22
Around the world:
The recent developments around the world are:
The Bloomberg News had reported that the extra budget stated by Japan for curbing the effects of the pandemic on the country, also includes 220 billion yen which is 156523789312.00 Indian Rupees for companies to move production and other activities to other countries. Daily Wire reported that a research conducted in February this year by Tokyo Shoko Research found that 37 per cent that is 2600 companies that responded to the survey were diversifying to places other than China in response to coronavirus crisis. China’s central bank had increased the financial stake in the Housing Development Finance Corporation (HDFC) by 1 per cent. No sooner did the China Government take the decision did the Indian Government change the FDI rules. According to the new amendment of Foreign Direct Investment rules, the government’s approval stands mandatory for any FDI. This information was stated by Press Note by Department for Promotion of Industry and Internal Trade (DPIIT). The United States, Japan, and Australia have already placed restrictions on the purchase of assets by Chinese companies. IMF also reports the Chinese economy to grow at 1.2 per cent in 2020.
A projection of India’s coping mechanism to save the economy
In the World Economic Report, the International Monetary Fund had reported that India falls in the category of fastest-growing emerging economies of the world. Japan has directed it’s companies in China to move activities to other countries, to do so Japan is offering billions. Would these companies that would move to new countries or existing countries benefit greatly by moving to India? Undoubtedly, yes.
The Indian economy has a large young human capital which would benefit companies moving to India. New-to-India companies, such as Ikea showed tremendous growth and footfall at its brick-and-mortar store only in one year of establishment in India and with only one store in the entire country. India is also a warehouse of resources both natural and anthropogenic which adds to the value the country offers to foreign firms. India has several companies founded and established in India and run by Indians such as Reliance, Tata, Godrej, Piramal, Adani, and more. Alliances and partnerships with Indian companies also add to the advantage of foreign companies venturing into a new market. A growing and emerging economy also show a high aggregate demand and with a projected 1.9 per cent growth of GDP, there is surely a much-awaited aggregate demand to soar.
Before the pandemic, under normal circumstances, over the past few years, Prime Minister Honorable Narendra Modi had visited several countries. He toured across the world and met officials in poignant positions – Presidents and PMs of many countries. He was the major representative of a country with a large potential-India. United Nations Secretary-General Antonio Guterres’ spokesperson had said that he salutes countries who are helping other nations amidst the Covid-19 fight after India had sent the anti-malarial drug hydroxychloroquine supplies to several countries around the world, including the US. This noble gesture in times of need has undoubtedly fetched deeper bonds between countries around the world and India. According to liveMint India is gifting these medicines, and acting as a medical saviour to countries lacking medical supplies of these drugs. Humanity is winning in times of crisis and the same will repeat in terms of economy.
The Guardian reports a brewing tension between the Russia and China border. The Chinese nationals trying to flee Russia has created tension at the border between the allies. The Guardian also stated that the independent scholar formerly at Beijing’s Tsinghua University, Wu Qiang, who said, “The shutdown of borders between the two countries has demonstrated the awkward situation that China is into when dealing with an ally like Russia.”
The United States of America’s President Honorable Donald J. Trump on his visit to India on February 24-25, 2020, together with Indian Prime Minister Honorable Narendra Modi had vowed that the relation between India and USA will be strengthened, anchored in trust, goodwill, engagement and empowerment of citizens creating a comprehensive Global Strategic Partnership. Major defence partner, fighting crimes, bilateral commercial relations, accelerated access to LNG in the Indian market, construction of six nuclear reactors at the earliest date, and collaborations in science, technology, and innovation, among many other notable statements about strengthening ties in various spheres. With such investment and projected growth, companies investing in India will show considerable growth and sustainability.
Companies will thoroughly benefit through their investment in the Indian market and this also stabilizes India’s economic situation. Stability in India’s economic situation would, in turn, help the foreign companies as well. It acts as a cycle of growth and development.
Fast-growing sectors of India
According to the data on Invest India’s website, India is the world’s 4th largest vehicle market. It has a 40% share in global R&D. On the other hand, Japan has a big manufacturing industry. Some automobile companies of Japan are Suzuki, Nissan, Toyota, Honda, Mitsubishi, Kawasaki, and Yamaha. Some names are unheard in the Indian market such as Subaru and Isuzu, which can (if they would want to) venture into Indian markets. Real estate is also a poignant industry of Japan and data on government portal Invest India states “100 smart cities by 2020” under construction.
India has the 5th largest defence budget in the world and as a major defence partner to the superpower nation, USA, there will be further growth in defence.
India continues to manufacture healthcare products, and at a faster rate now, the healthcare industry was projected to reach $372 billion by 2022. The high amount of exports of drugs to neighbouring countries and more development in health to meet the Covid-19 demands would push the numbers higher. India is also the 4th largest market for medical devices, 74% private sector’s share in hospitals, with a growth rate of 15.8 per cent. There are also 250+ health-tech startups in India.
These above statistics as per Invest India portal of the Government of India show the growth in the healthcare industry, welcoming FDI from countries in various industries especially manufacturing since India has a number of untapped resources in manufacturing, a gateway for companies whose government’s are posing restrictions in trade with certain countries and also imposing production restrictions.
India being one of Asia’s largest emerging economies provides the potential for FDI and growth. India has shown the success of many foreign companies on its home ground. This could be a primary reason why the country stands as one of the largest emerging economies today and as the IMF says, the country is unlikely to show negative growth.