India’s Strong Consumption Story and Favourable Factors Propel Economic Growth
By Y P Prakash
The growth of regional industries is crucial for India to realize its ambitions of becoming a global manufacturing hub, and India’s potential in this regard is undeniable. The International Monetary Fund predicts that India’s GDP will grow by 6.1% in 2023, surpassing China’s projected growth of 4.4%. Furthermore, India is expected to surpass Germany and Japan to become the world’s third-largest economy in the next decade, with a projection to become a $10 trillion economy by 2035, as stated in a report by the Centre for Economics and Business Research.
To effectively tap into the local consumer market, foreign businesses need to establish strong relationships through local manufacturing. By establishing manufacturing facilities in India, foreign companies can position themselves to benefit from the growing consumer base. Building a local presence allows businesses to understand the unique needs and preferences of Indian consumers, adapt their products accordingly, and establish stronger brand loyalty.
By leveraging local manufacturing and building relationships within the Indian market, foreign businesses can position themselves to thrive in India’s growing economy and tap into the vast consumer potential that the country offers.
While foreign businesses can benefit from establishing local manufacturing facilities and building relationships in the Indian market, the government of India, under the leadership of Prime Minister Narendra Modi, has been actively working to create employment opportunities and promote self-employment through various initiatives.
Indian Prime Minister Narendra Modi distributed approximately 70,000 appointment letters to newly recruited candidates in various central government departments recently. These individuals will join departments such as financial services, posts, school education, higher education, revenue, as well as the ministries of defence, railways, and health. The event showcased the government’s commitment to creating employment opportunities and promoting self-employment through initiatives such as the Mudra Scheme, Startup India, and Stand-Up India.
Modi highlighted the influx of multinational companies investing in India for manufacturing, which contributes to production, industry expansion, and increased exports. He underscored the role of foreign investments in generating employment opportunities and expressed pride in India’s progress as a stable, safe, and strong country. The Prime Minister cited global agencies’ acknowledgment of India’s efforts in improving ease of living, infrastructure development, and ease of doing business.
Prime Minister Modi’s emphasis on foreign investments and their role in generating employment opportunities aligns with the deepening relationship between American companies and India as manufacturing and supply chain partners. This is exemplified by Boeing’s recent agreement with Air India, which not only sets a new record but also highlights the increasing collaboration between the two nations. With Boeing supplying 220 aircraft, valued at approximately $34 billion, to India’s largest airline, it marks the largest purchase ever made in civil aviation history.
For Boeing, this deal is the third-largest sale in terms of value. Additionally, Boeing’s European competitor is also part of the agreement. The massive order from Air India includes 250 Airbus passenger jets, 190 Boeing 737 Max aircraft, 20 Boeing 787s, and 10 Boeing 777Xs.
This deal not only tests the capabilities of the companies involved but also highlights the efforts of India, a South Asian economic powerhouse, to attract foreign companies and establish itself as a global manufacturing hub. Western corporations are seeking alternatives to their reliance on China, which has been the world’s factory.
To strengthen ties with India, U.S. Secretary of Commerce Gina Raimondo recently visited the country.
The Boeing deal reflects a broader trend among global manufacturers, including Apple, Samsung, and Nokia, who are accelerating their manufacturing activities in India. This agreement could bolster Boeing’s plans to expand its Indian supply chain and promote local manufacturing.
Dave Schulte, the commercial airplanes Managing Regional Director of Marketing for Boeing’s Asia Pacific and India region, emphasized Boeing’s commitment to supporting the development of indigenous aerospace and defence capabilities in India. He expressed that India presents numerous opportunities, and their growth, along with increased partnerships with suppliers, demonstrates their progress toward a self-reliant India (Aatmanirbhar Bharat).
Furthermore, the growth of the Indian aviation industry will create more opportunities for local sourcing, skill development, and service support, according to Schulte.
India has actively positioned itself as an alternative manufacturing destination in Asia to reduce reliance on Chinese manufacturing. As early as 2014, India initiated the “Make in India” campaign to enhance its reputation as a global manufacturing hub and attract multinational companies to establish production facilities in the country. However, achieving the campaign’s key objective of increasing manufacturing’s contribution to 25% of GDP has been challenging.
In 2020, India launched the Atmanirbhar Bharat campaign, which was referenced by Boeing’s Schulte. This campaign aims to promote self-reliance in various sectors, including manufacturing.
According to Amitendu Palit, an economist specializing in international trade and investment at the National University of Singapore, the Indian Government has expressed its policy objective of becoming a global manufacturing hub. India anticipates benefiting from global shifts away from China in significant markets such as smartphones and semiconductors by attracting crucial segments of the supply chains.
India recognizes the potential opportunities presented by changes in global dynamics and aims to capitalize on them by positioning itself as an attractive manufacturing destination and leveraging its strengths in various industries.
As India aims to capitalize on the potential opportunities presented by changes in global dynamics and position itself as an attractive manufacturing destination, Prime Minister Modi addressed concerns of corruption in the recruitment process. He condemned dynasty politics and nepotism, warning the youth about scams involving “cash for jobs” and “land for jobs” that have recently surfaced. By reassuring the youth of the government’s commitment to safeguarding their future, the Prime Minister urged them to make a choice between parties engaged in corrupt practices and the government’s unwavering dedication to their well-being.
Furthermore, Modi highlighted the government’s focus on language as a strong medium of employment. By prioritizing recruitment examinations in the mother tongue, the government aims to provide greater opportunities for the youth.
The National Rozgar Mela serves as a platform for connecting job seekers with employment opportunities across the country. Through this initiative and various government schemes, the Prime Minister reaffirmed the government’s commitment to fostering job creation, promoting entrepreneurship, and ensuring a bright future for the youth of India.
Meanwhile, in a recent address at the Dainik Bhaskar conclave, eminent banker Deepak Parekh emphasized India’s position as one of the fastest-growing major economies, fuelled by a robust consumption story. Despite the possibility of global disruptions affecting India, Parekh acknowledged that some slowdown in growth is inevitable. However, he highlighted several factors that contribute to India’s resilience and its comparatively lower dependence on the global economy.
Parekh noted that India’s domestic, consumption-based economy provides a significant advantage over countries heavily reliant on exports.
With political stability expected to continue, he expressed optimism for India’s economic outlook in 2024 and beyond. Additionally, he emphasized the strength of India’s banking and financial system, which has overcome previous challenges and is now well-capitalized, regulated, and experiencing reduced non-performing loans.
As India continues to experience robust economic growth, driven by a strong consumption story and favourable factors, it remains resilient amidst global uncertainties. Parekh’s insights shed light on the country’s economic potential, emphasizing the importance of domestic consumption, government initiatives, housing finance, and sustainable development in fuelling India’s progress.
During his address at the National Rozgar Mela, Prime Minister Narendra Modi emphasized India’s political stability and recognized the government’s decisive approach to progressive economic and social decisions. He highlighted the eagerness of the entire world to partner with India in its growth journey, despite challenges posed by economic recession, the global pandemic, and disruptions in the supply chain due to the Russia-Ukraine war.
