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A Future-ready Economy on a Roll

As India continues to harness its potential, the combined efforts of the government, private sector, and civil society will play a crucial role in building an inclusive and prosperous future

Published: Sun 26 Jan 2025, 12:15 AM

  • By
  • Issac John

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A sudden boom in the market seen in the recent days of Bombay Stock Exchange.

A sudden boom in the market seen in the recent days of Bombay Stock Exchange.

India stands at a pivotal juncture in its economic journey, characterised by significant leaps in growth and development. The country’s economic leap, turbocharged by unique demographic advantages, technological advancements, and a thriving startup ecosystem, defines a new milestone in its growth as a global powerhouse, outpacing Japan and Germany as the third-largest economy within years.

While challenges remain, strategic investments in infrastructure, skill development, and sustainable practices will be crucial in navigating the complexities of a rapidly changing global landscape on the back of a burgeoning population of over 1.4 billion, a rapidly advancing technological landscape, and a vibrant Micro, Small, and Medium Enterprises ecosystem.

Currently the fastest-growing major economy, the country is poised to be the third-largest global economy by 2028 with an estimated GDP of $5.2 trillion, and remains on track to achieve an average annual growth rate of 5.9 per cent between 2025 and 2035, second only to Vietnam. Rising population, however, presents mounting challenges in basic service coverage and growing investment needs to maintain productivity, S&P Global Ratings has said.

$30 trillion economy

“Emerging economies have high ambitions for the next decade and beyond with India aiming to become a $30 trillion economy by 2047, from the current $3.9 trillion. India is currently the fifth-largest economy.”

Its 2024 entry into JP Morgan's Government Emerging Market Bond Index could provide additional government funding and unlock significant resources in domestic capital markets. This is only a first step — investors will continue looking for improved market access and settlement procedures," S&P wrote in its report titled 'Look forward Emerging Markets: A decisive decade.'

Economists argue while challenges remain, strategic investments in infrastructure, skill development, and sustainable practices will be crucial in navigating the complexities of a rapidly changing global landscape.

Demographic advantages

India boasts one of the youngest populations in the world, with over 65 per cent of its citizens under the age of 35. This demographic dividend presents a unique opportunity for economic growth. A young workforce is generally more adaptable, innovative, and willing to embrace new technologies. The sheer size of this demographic can drive consumption, enhance productivity, and fuel economic dynamism.

Close up image of stock market data on a monitor.

Close up image of stock market data on a monitor.

Rapid urbanisation is another critical factor contributing to India’s economic leap. According to the United Nations, India is projected to have 600 million people living in urban areas by 2031. Urban centers are typically hubs of economic activity, offering better infrastructure, educational facilities, and job opportunities. This shift not only stimulates economic growth but also paves the way for improved living standards and enhanced quality of life.

Skill development

Recognising the importance of education and skill development, the Indian government has launched various initiatives aimed at enhancing the employability of its workforce. Programmes like Skill India, Digital India, and Make in India focus on equipping young Indians with the necessary skills to compete in a rapidly evolving job market. Improved access to education and vocational training will enable the youth to contribute effectively to various sectors, thereby driving economic growth.

India is undergoing a digital revolution, with technology permeating every sector of the economy. Initiatives like Digital India aim to transform the country into a digitally empowered society and knowledge economy. The proliferation of the internet, mobile connectivity, and digital payment systems has facilitated a more inclusive economy, enabling millions to access services previously unavailable to them.

E-commerce boom

The e-commerce sector in India has witnessed exponential growth, largely driven by increased internet penetration and changing consumer preferences. According to a report by the India Brand Equity Foundation (IBEF), India’s e-commerce market is expected to reach $200 billion by 2026. This boom not only contributes to GDP growth but also creates jobs and fosters innovation in logistics, supply chain management, and digital marketing.

The fintech sector in India has emerged as a game-changer, revolutionizing how financial services are delivered. The rise of mobile banking, digital wallets, and peer-to-peer lending platforms has improved financial inclusion, enabling millions of unbanked individuals to access credit and savings tools. The regulatory support from the Reserve Bank of India and government initiatives like Jan Dhan Yojana have further bolstered this sector.

Focus on R&D

India’s commitment to innovation is evident in its investments in research and development (R&D). The government has launched various schemes to promote R&D in key sectors such as biotechnology, renewable energy, and artificial intelligence. Collaborations between academic institutions and industry players have further accelerated technological advancements, positioning India as a hub for innovation.

Startup boom

India has emerged as one of the world’s largest startup ecosystems, with over 70,000 startups registered as of 2023. The government’s supportive policies, access to venture capital, and a growing pool of entrepreneurial talent have fueled this boom. Cities like Bangalore, Delhi, and Mumbai have become hotspots for innovation, attracting significant investment from both domestic and international sources. Government initiatives such as Startup India aim to foster a conducive environment for startups. The program offers various incentives, including tax benefits, funding support, and regulatory simplifications. Furthermore, incubators and accelerators have proliferated, providing startups with mentorship, resources, and networking opportunities.

Startup, MSME sectors

The MSME sector plays a crucial role in India’s economic landscape, contributing nearly 30 per cent to the country’s GDP and employing over 110 million people. The government has implemented various schemes to support MSMEs, such as the Credit Guarantee Fund Scheme and the PM Employment Generation Programme. These initiatives aim to enhance access to finance, technology, and markets, fostering growth and sustainability in this vital sector. The startup and MSME ecosystems demonstrate remarkable adaptability and innovation. Entrepreneurs in India are increasingly leveraging technology to address local challenges, creating solutions that are not only viable but also scalable. Sectors such as agritech, healthtech, and edtech are witnessing significant advancements, showcasing the potential of Indian startups to drive economic progress.

Infrastructure development

While India has made significant strides in economic growth, infrastructure development remains a critical challenge. The need for improved transportation networks, energy supply, and digital infrastructure is paramount to sustain growth. The government’s focus on initiatives like the National Infrastructure Pipeline (NIP) aims to address these gaps, with an investment target of $1.4 trillion by 2025.

The regulatory environment can be a double-edged sword for startups and MSMEs. While the government has introduced several reforms to enhance ease of doing business, bureaucratic hurdles and compliance requirements can still pose challenges. Streamlining regulations and simplifying compliance processes will be crucial for fostering a more conducive business environment.

Skill Gap

Despite initiatives to enhance skill development, there remains a significant skill gap in the workforce. Aligning educational curricula with industry requirements and promoting lifelong learning will be essential to equip the workforce with the skills needed for the future.

India’s economic growth is also influenced by global factors, including trade dynamics, geopolitical tensions, and economic slowdowns in key markets. Diversifying trade partnerships and enhancing domestic capabilities will be essential to mitigate these risks.

Future readiness

As India seeks to position itself as a global economic powerhouse, embracing sustainable development will be paramount. Investments in renewable energy, sustainable agriculture, and eco-friendly technologies can drive economic growth while addressing environmental challenges.

In a rapidly digitising world, enhancing digital literacy is crucial. Government and private sector initiatives should focus on improving digital skills across all demographics, ensuring that the workforce is equipped to thrive in a technology-driven economy.

Global partnerships

India should continue to forge strategic partnerships with other nations to enhance trade, investment, and technology transfer. Collaborations in areas such as research and innovation can further bolster India’s position on the global stage.

To ensure that the benefits of economic growth are widely shared, inclusive policies must be prioritised. This includes providing support for marginalised communities, women entrepreneurs, and rural enterprises, thereby fostering a more equitable economy.

As India continues to harness its potential, the collective efforts of the government, private sector, and civil society will be essential in shaping an inclusive and prosperous future. With its youthful workforce, innovative spirit, and commitment to progress, India is not just ready for the future — it is poised to lead on the global stage.

—issacjohn@khaleejtimes.com



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