India continues to remain one of the fastest growing economies, despite numerous headwinds, triggered by geopolitical unrest and consequent economic pressure. Striving towards becoming a self-reliant economy, the country’s economic position has been bolstered on the back of an all-time high in exports, increasing foreign investments and growing global collaboration.
From a macro-economic perspective, the country shows a positive trajectory, driven by a revival in core industries, sustained industrial output, and expanding manufacturing and services output. The country's exports were at an all-time high in FY2022, led by a series of government initiatives, including Production Linked Incentive (PLI) Scheme, discussions around Free Trade Agreements (FTAs), incentives around Special Economic Zones, and assistance to startups and new manufacturing firms. The FTAs are opening up the market for Indian goods and services abroad, given the quality standards are maintained throughout by the exporters.
Improved fundamentals of the corporate sector and a well-capitalised financial system have instilled confidence in investors. For instance, gross foreign direct investment (FDI) inflows increased, from USD82 billion in FY2021 to USD83.6 billion in FY2022, signaling rising confidence. A 35.4 per cent y-o-y increase in capital expenditure to nurture infrastructure development, is further expected to boost investment prospects. Private equity and venture capital investments continue to rise as well.
Both domestic and foreign businesses show positive sentiments, attributed to certain policy actions undertaken by the government. These are spread across simplification of compliances, digital transformation across several domains, and increasing focus on infrastructure and connectivity. Other factors including increasing internet penetration, growing consumer confidence, technological advances, and other business friendly reforms are further fueling growth. Digital transformation led use of technology tools and data intelligence is playing a pivotal role towards reducing procedural complexities, increasing compliance, and streamlining efforts at each stage of doing business.
Being the 3rd largest ecosystem for startups globally with over 75,000 recognised start-ups, India continues to drive momentum in business capabilities and product innovation. Sectors such as technology, healthcare, fintech, education, energy, among others, exhibit growth potential, translating into new business opportunities for both domestic and foreign manufacturers. In fact, from a FDI perspective, regulations have been relaxed in several sectors to either increase the cap for investments or its inclusion under the automatic route. Additionally, norms around concessional tax, reduced surcharge, and custom duties further corroborating with the idea of easing doing business.
Sustained economic recovery, coupled with a series of focused government initiatives provide a comforting backdrop for businesses, representing a conducive environment for companies planning to invest in the country. However, it is imperative for companies to be vigilant of the global economic developments and its impact on business activity and consumer confidence. Moreover, it is critical for foreign businesses and investors to comprehend local norms and cultural nuances, including regionalisation, consumer sensitivities, and local laws, to ensure fruitful outcomes.
