India’s economy is blistering, and growth is expected to continue throughout the fourth quarter of 2023. India has one of the fastest-growing major economies in the world, and throughout fiscal years 2022 and 2023, the growth rate is at 7.2%.
Of the G20 countries, it is the second-highest growth rate. Also, it is nearly twice the average growth rate for emerging market economies.
India’s solid public infrastructure investment, strong domestic demand, and a growing financial sector contributed to this resiliency. In addition, India’s bank credit expanded to roughly 15.9% in the first fiscal year quarter of 2023/2024 compared to fiscal year 2022/2023 of approximately 13.3%.
Several sectors have primarily driven India’s economy. These sectors include the food, financial, digital, infrastructure, real estate, automobiles, auto components, and manufacturing industries.
These specific business sectors that have seen phenomenal growth. India has become a vibrant market for several industries because of its developing middle class, rising consumer buying power, and expanding population.
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How Fast is the Real Estate Industry Growing in India?
India’s real estate sector is the second-highest employment sector within the nation. The sector is proliferating and continues to draw investment from outside countries. Analysts believe that the real estate market will grow to one trillion dollars by 2030. This number is up from 200 billion in 2021. Also, the real estate sector will contribute roughly 13% to the country’s gross domestic product by 2025. The commercial real estate sector is also proliferating.
Several factors have helped to account for India’s real estate boom. Specifically, initiatives and policy changes made by the Indian government have been crucial in fostering the expansion of the real estate industry. Innovations like Housing for All by 2022 and Smart Cities Mission have encouraged affordable housing developments and integrated townships.
India’s rising commercial and industrial sectors have significantly contributed to the rise in real estate prices. Demand for office space and industrial buildings has grown due to corporate growth, startup activity, and international enterprises. Commercial real estate is in high demand due to the rise of major commercial centers like Bengaluru, Pune, Mumbai, and Hyderabad.
How Quickly is the Infrastructure Industry Growing in India?
India’s infrastructure is proliferating. The Indian government has focused on policies to help create a rapidly growing infrastructure. The industry stimulates the growth of adjacent industries, including townships, housing, construction, and building development projects, acting as a stimulus for economic expansion.
For India to reach its economic growth potential, which many believe is five trillion dollars by 2025, it must continue to promote expansion and development projects. To maintain its expansion and achieve its growth, India has introduced the National Infrastructure Pipeline (NIP) and other programs to help the infrastructure industry flourish, including the Make in India and Production-Linked Incentives (PLI) programs.
A significant focus of infrastructure investment is on irrigation and water, transportation, and power, which comprise 80% of infrastructure spending.
Is There Rapid Growth in Manufacturing in India?
By 2030, India will be an important center for global manufacturing, with the capacity to export goods worth $1 trillion. In India, manufacturing accounts for around 27.3 million employment and 17% of GDP, making it a substantial contributor to the national economy. By 2025, the Indian government hopes to achieve its goal of manufacturing contributing 25% of the nation’s economic output by implementing several initiatives and policies.
There are several areas of growth within India’s manufacturing areas. In particular, the Indian textile industry has exploded, which is only second in the world to China’s textile industry. More than 50% of India’s textile exports are made of cotton, although other exporters of synthetic, wool, and silk textiles exist. India’s textile industry is one of the country’s oldest; therefore, Indian providers set themselves out by producing items like knitted bespoke clothes garments using outmoded, quality-focused methods. In addition, it’s important to note that roughly 45 million individuals work within the Indian textile industry.
Another primary manufacturing industry within India is the leather industry. The leather industry within India has transformed from not just a raw materials provider but also a significant exporter of value-added goods. In India, hundreds of leather factories are spread over seven distinct locations. Leather providers serve the footwear, clothing, accessories, and furniture industries. India is the world’s second-largest manufacturer of leather clothing and shoes.
Lastly, India is home to a growing and robust technology sector. India has the world’s third-largest population of scientists and technicians; electronics and electronic accessories are also a significant sector. Advanced and plentiful R&D capabilities, great design, and skilled labor are all present. The labor force is not only cost-efficient but also skilled.
The ten largest technology companies in India are Hexaware Technologies Ltd, LTI Mindtree Ltd, Tech Mahindra, HCL Technologies, Wipro Limited, Flipkart, Mphasis Ltd, Infosys Limited, Quess Corp Limited, and Tata Consultancy Services Limited.
How will High Oil Prices Potentially Affect India’s Economic Output?
India, a net importer of crude oil, is significantly impacted by the economic impact of the world’s oil supply. India fulfills roughly eighty-five percent of its energy needs by importing oil. Global crude oil investing and fluctuation in oil prices can affect the overall growth of India.
According to the Petroleum Planning & Analysis Cell (PPAC), India produced 2.50 million metric tonnes (MMT) of crude oil in July 2023, up 2.1% over the same month the previous year. Both oil producers Saudi Arabia and Russia extended their output restrictions, which combine to 1.3 million barrels per day (bpd) until the end of the year; international crude oil prices are soaring at 10-month high levels.
Overall, the news shocks relating to the oil supply lead to a steady rise in consumer prices, affect the value of the Indian rupee and lower domestic output.
India’s trade balance has been upset by the significant rise in crude oil prices, increasing its vulnerability as a net oil importer. Because of the high energy cost due to this firm reliance on oil imports, the stability of the Indian rupee is under threat. Inflation is increasing, posing a severe obstacle to India’s economic development as the rupee deteriorates and import costs rise.
India imports a large amount of oil from Russia to counter the rapid rise in oil prices. Russian oil has been in high demand by India’s refiners ever since Russia invaded Ukraine in February last year. Since then, Moscow has advanced to take the lead as India’s top crude oil supplier, providing approximately 40% of the country’s crude imports. By getting its hands on Russian oil, India’s economy has benefited overall. Although the importation has benefited India, the West has condemned India’s acquisition of cheap Russian oil in great detail. Josep Borrell, the top ambassador for the EU, encouraged the organization to take action against India’s resale of refined Russian oil into Europe. Sanctions imposed by the West on Russia’s oil trade have greatly helped India. By increasing its purchases of Russian oil, the government has saved an estimated $3.6 billion in less than a year.
Bottom Line
India is one of the fastest-growing economies in the world. The country’s growth for fiscal years 2022 and 2023 is at 7.2%. Amongst the G20 Countries, India is the second fastest-growing country. In addition, the country is growing twice as fast as emerging market economies.
Several industries are contributing to the growth of India’s economy. Those industries, in particular, are the real estate, manufacturing, and infrastructure industries.
India’s real estate sector is enormous and is the second-highest employment sector within the country. At its existing growth rate, many analysts believe that by 2030, the real estate market will grow to one trillion dollars. The real estate sector in India is roughly 13% of the country’s GDP. Many factors have affected India’s real estate boom and the size of the rapidly growing industry. Several initiatives have fostered real estate growth, including affordable housing developments in integrated townships.
India’s infrastructure industry is growing by leaps and bounds. The Indian government has created policies fostering growth in the infrastructure industry, namely townships, housing, construction, and building development projects. Analysts believe that by 2025, the infrastructure industry in India will be on pace to add five trillion dollars to the Indian economy.
India’s manufacturing sector is a significant contributor to India’s economy. The sector makes up roughly 27 million jobs and is approximately 17% of India’s GDP. Some believe that by 2025 the manufacturing sector will make up 25% of the economy. Some of the larger areas of growth contributing to the manufacturing sector are the textile, leather, and technology industries.
With any growing economy, oil production and importation play a significant role. India is a net importer of crude oil and has been affected by the spike in oil prices. The Indian rupee has been under threat because of the spikes in oil prices.
The Indian government, to counter the spikes in the price of oil and to help counter potential economic slowdowns, has purchased a significant amount of oil from Russia since the invasion of Ukraine. Since the invasion of Ukraine, Russia has become India’s top provider of crude oil and imports roughly 40% of India’s crude imports. Despite the spike in oil prices, India continues to grow rapidly.
