India: Trade and Investment Profile
Once known more for its mystical traditions and depressing poverty, India has gradually shed the not too flattering sobriquets of the past. In the world’s eyes now, the country is an emerging economic power where millions have emerged from poverty in a relatively short span of time and the economic fortunes of several more millions are set to transform for the better in the years to come. Now, most famous as the leading destination for information technology and other services outsourcing, India has reaped the benefits of globalisation more than most other countries.
India is the second-largest emerging country and has demonstrated the ability to grow rapidly. While growth slowed in 2011–12, this was simply the adverse impact of a global downturn, combined with the emergence of some domestic problems (which are now being resolved).
This slowdown does not mean a permanent shift to a lower growth trajectory. India has strong basic fundamentals, including a high rate of savings, an increasingly skilled labor force, a dynamic private sector and increasing global competitiveness in many areas. There are also some deficiencies, most notably in the area of infrastructure.
The return to faster growth will not happen automatically. The Government needs to work on several areas, notably investment in infrastructure. This is the single-biggest supply-side constraint for India’s growth and competitiveness.
The infrastructure, consumer products, industrials, technology, media and telecom (TMT), and life-sciences sectors are set to drive India’s growth over the next two years.
Investors are considering India for both their services and manufacturing supply chain. With the services sector forming the backbone of India’s economy, the Indian Government is placing more weight on strengthening the country’s manufacturing ecosystem.
Our research shows that global investors are starting to recognise relevant efforts, with the vast majority expecting India to be a leading manufacturing hub by 2020. But for that to happen, the environment must be more enabling and measures on other competitive issues, including currency stability and ease of doing business, must be implemented.
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