Indian Economy Project

on
India has 6th largest economy And 3rd largest consumer market :

Future of Indian Economy

By :Aslam Mehar (2017BBA007)

Jayant Bhandari (2017BBA012)
India the
6thlargest
economy
• Indian economy recently became the sixth largest economy in
the world in terms of gross domestic product (GDP) by
overtaking France.
• After suffering from transitory shock in the last two years due to
reforms like demonetisation and Goods and Service Tax (GST),
Indian economy is back on track.
• However, the Indian economy slowly and steadily recovered
and at the end of 2017, Indian economy’s GDP stood at $2957
trillion while French economy value was $2582 trillion
• Gross Fixed Capital Formation in India has increased
drastically in last decade from 2,875 billion rupees in 2009 to
11,575 billion rupees in 2019
Consider this:
 Just in the last decade, India has doubled the size of its
economy outpacing that of France.
 While India's GDP has risen by an average 8.3 percent
over the decade, that of France's actually declined by
0.01 percent.
 To add more perspective, in the past 10 years India's
GDP grew by 116.3 percent (from $1.201 trillion in
2007 to $2.597 trillion in 2017) while France witnessed
a 2.8 percent decline in GDP (from $2.657 trillion in
2007 to $2.583 trillion in 2017).
 Certainly, this tells us that India is gaining economic
size consistently and is emerging as one of
the powerhouses.
 IMF Report
• Nominal GDP: $2.61 trillion , GDP (PPP): $9.45 trillion
• India is the fastest-growing trillion-dollar economy in the world
and the sixth-largest with a nominal GDP of $2.61 trillion.
• India is poised to become the fifth-largest economy overtaking
the United Kingdom by 2019 as per the IMF projection.
• The country ranks third when GDP is compared in terms of
purchasing power parity at $9.45 trillion.
• India’s growth rate is expected to rise from 7.3% in 2018 and
7.5% in 2019 to 8% in 2020, as drags from the currency
exchange initiative and the introduction of the goods and
services tax fade according to IMF.
• India’s post-independence journey began as an agrarian nation,
however, over the years manufacturing and services sector
have emerged strongly.
• Today, its service sector is the fastest-growing sector in the
world, contributing to more than 60% to its economy and
accounting for 28% of employment.
• Manufacturing remains as one of its crucial sectors and is being
given due push via the governments' initiatives such as “Make
in India”.
• Although the contribution of its agricultural sector has declined
to around 17%, it still is way higher in comparison to the
western nations.
• The economy’s strength lies in a limited dependence on
exports, high saving rates, favorable demographics,
and a rising middle class.
 India : Third
Largest Consumer
Market
 World Economic Forum(WEF)
• According to the WEF, with an annual GDP growth
rate of 7.5%, India is currently the world's sixth-largest
economy.
• As per the report, growth in income will transform India
from a "bottom of the pyramid economy" to a middle
class-led one.
• By 2030, domestic private consumption, which
accounts for 60 per cent of the country's GDP, is
expected to develop into a USD 6-trillion growth
opportunity.
• The report stated that if realised, this would make
India's consumer market the third-largest in the world,
behind the US and China.
• The future consumption growth is
expected to come from rich and densely
populated cities and the thousands of
developed rural towns.
• The report stated that India's top 40
cities will form a USD 1.5 trillion
opportunity by 2030, many thousands of
small urban towns will also drive an
equally large spend in aggregate.
• In parallel, it noted that there will be an
 Future Consumption in India
Three major drivers will be the important
pillars of the future of consumption in India :-
• Income growth
• Urbanization
• Technology and innovation
 Income Growth
Growth in income will transform India from a bottom-
of-the-pyramid economy to a truly middle-class led
one, with consumer spending growing from $1.5
trillion today to nearly $6 trillion by 2030.
This will be driven by:
– Middle-class expansion and emergence of a
sizeable high-income segment: By 2030, India will
add about 140 million middle-income and 21 million
high-income households, overall nearly doubling the
total share of these segments to 51%.
 – Transformation of the consumption profile: Upper middle-
income households will drive 47% ($2.8 trillion) of total consumption,
and high-income households will drive another 14% ($0.8 trillion),
compared to 30% and 7% respectively today.
– Breakthrough states: While India’s aggregate income and
consumption will grow rapidly, 10 large “breakthrough” states will
lead the way: Kerala, Karnataka, Andhra Pradesh, Telangana and
Tamil Nadu in the south; Delhi, Haryana and Punjab in the north;
and Maharashtra and Gujarat in the west.
– Poverty elimination becoming a reality: Income growth will
have an even more positive aspect – India will lift nearly 25 million
households out of poverty; less than 5% of households will lie below
the poverty line by 2030, down from 15% today.
 Urbanisation
While metros and emerging boom towns continue to drive
economic growth, rural per capita consumption will grow faster
than in urban areas mimicking consumption patterns of urban
counterparts.
This will be characterized by:
– Dispersed urbanization and an urban-rural income
continuum: By 2030, 40% of Indians will be urban residents.
The top nine metros9 and 31 boom towns will be significantly
richer than other cities. However, there will also be >5,000
small urban towns (50,000-100,000 persons each) and >50,000
developed rural towns (5,000-10,000 persons each) that
already have very similar income profiles.
– Growth of rural consumption and
breakdown of the urban-rural
paradigm: Rural per capita consumption
will grow to 4.3 times by 2030, compared
to 3.5 times in urban India.
 Technology and Innovation

Internet access will be democratized by 2030 with more than

1 billion Indians – rural and urban, old and young – on the
internet, a truly remarkable achievement in terms of inclusion.
The key enablers will be:
– Mobile-first consumers: More than 80% of internet users
in India primarily access the web through mobile phones, a
figure expected to increase to more than 90% over the
coming years. This will be a significantly different profile of
connected consumers for businesses to target, compared to
the US, the UK and even China, where nearly half of internet
users today access the web through their desktops.
 – A “third wave” of telecom revolution: The first wave (2003-
2013) established widespread access to mobile phones and helped
India reach more than 100 million mobile users. The second wave
(2016-2018) saw massive growth in 4G and internet penetration,
driven by steeply declining prices of data and handsets. The coming
decade will be the third wave of democratization as voice-based
user interaction, vernacular and video content and easier access to
the internet will unlock a tremendous user base for consumption on
digital platforms.
– 1 billion diverse internet users: Access to the internet will
extend to about 1.1 billion users in 2030. Nine out of 10 Indians over
15 years of age will be online by 2030. The profile of India’s
connected consumers will be much more diverse than today – more
vernacular (~80% versus 60% today), more rural (50% versus 40%
today) and with older users (>35-year-old users to be 45% of users
versus 25% today).
Future of India–Direct Statements
• The report by Centre for Economics and Business
Research (Cebr) said. If the global markets remain steady and
political situation, then Indian economy will disposes Germany
as the fourth-largest economy by the year 2022. India will
emerge as the world’s third largest economy by 2027 , and
India’s national income will be around $6.5-7 trillion,
• Mr. Debroy NITI Ayog Member said according to Prime
Minister’s Economic Advisory Council (PMEAC) “If
exchange rate remains what it is today then, by 2035-40, India
will be $10 trillion economy. And if the exchange rate
appreciates, then India will be a $10 trillion economy before
2035.”
Future Of India (According to Current trend)
As far as according to understand the mechanisms
involved at this point, population dynamics have major
economic impacts and these can be categorised under two
main headings:
• demographic processes affect the size of the working
age population, and through this channel the level of
trend economic growth – for better or worse - in one
country after another
• Demographic processes affect patterns of national
saving and borrowing, and with these the directions and
magnitudes of global capital flows
 Comparative Study between
Economies of India And China
• Short term is all about china because of its
working age population (i.e. 63.5% of total
population of china lies in the age group of
18-59 years )
• But China Will Be One Of The Most
Rapidly Ageing Countries in the 2030s
• By 2040, assuming current demographic trends
continue, there will be 397 million Chinese over 65 -
more than the total current population of France,
Germany, Italy, Japan, and the United Kingdom
combined.
• It is during the 2020’s that China’s age wave will arrive
in full force.
• The elder share of China’s population seems set to rise
steadily from
 11 percent in 2004 to
 15 percent in 2015 to
 24 percent (forecasted) in 2030 and
 28 percent in 2040.
• Over the same period, China’s median age will climb
from 32 to 47.
• In India the whole demographic transition is much more
balanced.
• The increase in the 15-34 age-group population has
been quite dramatic:
– from 174.26 million (31.79 per cent) in 1970
– to 354.15 million (34.43 per cent) in 2000.
• The youth segment of the population is projected to peak
at 484.86 million in 2030.
• Working Age population of India in 2050 will be 62.8 %
approximate (forecasted )
 References
• https://indianexpress.com/article/business/economy/india-becomes-sixth-
largest-economy-in-the-world-overtakes-france-5256279/
• https://economictimes.indiatimes.com/news/economy/indicators/india-likely-
to-surpass-uk-in-the-worlds-largest-economy-rankings-
pwc/articleshow/67609647.cms
• https://www.thehindu.com/business/Economy/indian-economy-poised-to-
pick-up-in-2019-says-imf/article26052046.ece
• PwC report on “The World in 2050” (2017).
• IMF report on “Indian Economy (2018) “