Thursday, May 22, 2014

Why Is The Indian Economy Still Promising?

“What !”   “Did I read the heading wrong?”
Actually no, you didn't. A lot has been said in the past few years about India and its economy. In fact, ours was the most talked about economy in the past decade. We were raring to go, speeding away in terms of growth rate, giving complex to even the biggest economies of the world; we were the most promising nation in the world teasing our 'Dragon' neighbors. But lately, India has slowed down. As a matter of fact we are snailing now.
So has India lost its sheen? Is the growth saga complete, done, finished and a thing of the past now! No, not at all. India is still one of the most promising economies of the world.
To understand better , we must delve deeper into India's status right now, it's demographics, market potential and future prospects.
Prima facie it might look like India and China, the two most talked about countries of the world and  rightly touted as the world leaders in the next generation, are among the fastest growing economies of the world. Unfortunately, that's not true. Neither India nor China figure in the list of world's top ten fastest growing economies. In fact, India ranks around 35th (2012)  in terms of economic growth rate globally with a country like Mongolia topping the list. So why is it that investors worldwide still show their confidence in India? It is important to note here that it's the base effect that's important. India is a huge economy of close to 2 tn $ annual GDP. That being said, it is really humongous addition to the economy if a nation grows at 8-9 % annually on a base value of 1.5 to 2 tn $. Nigeria is a minuscule economy so while they outpace India and China in terms of growth rate (in % terms), the absolute addition to the economy is still very small. This is the prime reason why India was considered a forerunner in the race of nations-to-be. But have we lost that edge now? No, ours is a relatively huge economy and hence a growth rate of 5% might not be good enough but it's not too bad either. India is still running the race and is going fairly good if not great.
Second is the India's self-sufficiency. We have a huge population (Thanks to male nymphomaniacs like Lalu ji) which makes India a huge market in itself. Unlike China, we are not an export driven economy relying heavily on export bills to boost the economic growth. We have a huge market within our country that makes it possible for Indian production to be consumed within India itself. This was one prime reason that India remained largely unimpacted by the 2008 recession. China, on the contrary, is highly dependent on its exports especially with US. Major chunk of Chinese exports are 'dumped' into US. This Chinese love affair with US goes to such an extent that if one fine day US economy nears death, China will have no choice but to succumb to death along with like a true loyal lover. Some might also argue here that exports form an important aspect of any country's economy because it helps boost your forex and balances your import bills thus slashing CAD. Yes, it is important but as they say there is no full-proof theory when it comes to macro-economy. There always has to be a fair balance between various parameters. No one theory can completely define a country's economics. India should definitely aim to increase its exports, but at the same time it should be checked that these exports do not come at the cost of the domestic market Also, the economy should not get over-reliant on exports only.
Third is the huge unexplored potential of the Indian markets lying at the 'Bottom of the Pyramid' (BOP). This is one sector that has almost been left out of the development process. When this market starts to pick up India's market size would almost double. Again, this would make India more self-sufficient which is desirable. This is one reason why foreign behemoths still look forward to invest money in India and will continue to do so in the coming few years. India has immense potential to grow in future which makes it a great business destination (lest we talk about the rigamaroles of Indian red tapism!).
Fourth and probably the most important is our huge labor force which apparently includes me and you. We are about 120 bn people with close to half of them being at the peak of their careers. The next 20 years are the golden age for India because we will have the biggest working force in the world. We Indians, by nature, are hard-working and street-smart which further adds on to this. India's mettle has been acknowledged by economists and business houses across the world.
Hopefully, the IT outsourcing boom was just one of many more such booms to come. The world knows the power of India today. India is raring to go, wild yet calm, strong yet feeble. So India is still one of the most promising economies of the world with a potential to transform the world in the years to come.

Pseudonym : h!v
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