Amid global economic uncertainty, the Indian benchmark indices, the Nifty and the Sensex are back to their all-time highs. Here are some factors that makes the Indian economy stand out.
Onwards and Upwards
Between 1991 and 2020, the annual population growth was under 1%, whereas the Indian economy grew by 6.2% annually within the same period. As a result, India’s per capita income improved and increased every decade. However, this metric does not take into account the income inequalities among the population, but it reflects an improvement in the living standards on an overall basis.
A conservative estimate of 6% GDP growth going forward and 0.8% population growth would mean that per capita GDP will grow at around 5% in the years to come!
Favourable Demographics
India still enjoys a favourable demographic dividend, defined as a phase where the working-age population exceeds the dependent population. By 2025, India will add 11 million workers annually, thus having a larger pool than its emerging peers, such as Indonesia, Vietnam, and Brazil.
A median Indian is 27.9 years old, younger than its European (41.9), North American (38.2), and Chinese (38.5) counterparts. By 2030, this Indian median age is expected to cross 30, an age which fuels consumption and investments!
Default-Free Status
India has successfully avoided the tag of a ‘defaulter’ on its debt repayments unlike many other Asian economies such as Sri Lanka, Pakistan, and Afghanistan. This has been possible through careful dollar borrowings and by accumulating forex reserves to protect against potential debt crises.
India has a low vulnerability to debt default, which is an advantage for investment worthiness among other emerging countries.
Fiscal Prudence
Although central government has often missed their targets to reduce the fiscal deficit as a percentage of GDP, a stated long-term target provides relief even if there are some deviations in between and the government has signalled intent to be fiscally prudent.
With long-term tailwinds and short-term headwinds, India is poised to grow leaps and bounds in the coming decades to emerge as a global superpower!
