On 4th February, 2021 Payal Kanwar, Director General / Directrice Générale at Indo-French Chamber of Commerce & Industry kicked off the India Business Month 2021 with an overview of Indian economy and doing business in India in the next 5 years for international companies. With the Indian budget announced recently, Payal talks one-on-one with Maarten van der Schaaf of IndiaConnected to evaluate the forecast for foreign businesses.
2020 for everyone across the globe has brought everyone together in a way like you are for say sitting in India and somebody is sitting in Brazil and for a fact we all are going through the same thing i.e Covid-19. It has also majorly impacted the Indian economy. As the government announced the complete lockdown in March which continued till May the business lives came to a complete stand still except for essential services.
From an economic perspective, India was already facing a slower growth rate of about 3.1% in the last quarter of 2019. Then we entered 2020 and the pandemic struck at the beginning of the year. In the first quarter of 2020 i.e April to June India showed a contraction of 24% which is the largest in history that’s anyone has ever seen. In quarter two, India still stood at -7% and quarter 3 and quarter 4 results are still awaited. The estimates today are India might end this financial year at about -7.7%. These statistics definitely show how much India has been impacted.
Impact of Covid’19 on Indian Economy:
Sectors like Industrial manufacturing and services were heavily hit with an exception of agriculture as there was a good harvest season in India. The revival figures were an indication which was from -24% to -7% which was strong enough to prove that India has the capability of bouncing back. Another reason for the negative growth is because of the second wave of covid’19 in India. Economists are trying to figure out how Indian economy is going to recover. Some suggest that it is a split recovery where some sectors are going to recover at a much faster pace like technology, pharmaceuticals whereas industries like aviation sector and hospitality is going to get back to normal at a slower pace.
Covid’19- An opportunity for India
A lot of companies have innovated and the major trend we can observe is India’s fierce acceleration in digitisation and strength of its digital economy. Sectors like the financial service and education have gone through a digital revolution. Consider for example ecommerce business transaction. In India there are millions of financial transaction happening per day. The opportunity here is mammoth.
The second opportunity lies in building the vaccine capabilities. The low cost innovation which we have seen is amazing.
Thirdly the innovation which the retail sector is going through is interesting. The luxury retailers have a huge real estate cost so when the pandemic hit they had to close overnight. Thus these luxury firms developed a call centre sort of and changed their CRM practices. This helps them in going on with the sales.
Growth in India 2021-2025
There are a lot of sectors relevant in terms of growth. According to our recent budget, a big push has been given to the infrastructure sector. India is improving its capital expenditure and infrastructure capabilities. This would be a great opportunity for foreign companies as well to contribute in the Indian economy.
Government has also announced that a certain number of cities will become smart cities in India. It’s an area where a lot of European companies are heavily involved today. Other sectors would be the waste management, water distribution, metro and rail road is going to accelerate over the next couple of years. Green technology and renewable energy has big ambitions in India. Similarly the IT sector space is a promising sector to look up to. Lastly, the FMCG sector. India has a rising young population in the world. The purchasing power is going to increase in next couple of years.
The Road Ahead:
The Indian government has taken number of steps to ensure ease of doing business in India. India has jumped the rank and now positions at 69th on the ease of doing business rank.
Secondly, production link incentive scheme where the government has identified 13 sectors which will give local manufacturing a boom.
Thirdly, the government has also launched a national land bank system because land acquisition is a long and cumbersome process in India which needs a lot of approvals. Government wants to focus on single window clearance which seems to be quite promising.
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