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Indian economy
Source: Cushman &Wakefeld India Pvt. Ltd.
India is the world's tenth largest economy at market
exchange rates and the third largest economy when
adjusted for purchasing power parity1. The Indian economy
has been one of the fastest growing economies in the
world and has consistently demonstrated a positive Gross
Domestic Product (“GDP”) growth rate averaging just
below 8% over the last ten years (FY03/04 to FY12/13 )2.
India’s GDP has grown by 4.6%3 in the frst three quarters
of FY13/14. Service sector, a major contributor of India’s
GDP has grown by 10.5% during the same period.
Manufacturing/Industrial sector is also witnessing positive
growth. As per advance estimates from the Central
Statistical Organisation, India’s GDP growth for FY13/14 is
expected to be 4.9%.
Infation did not abate in FY13/14 even though tight
monetary policy kept interest rates high, with the
consumer price index touching 11.2%4 in November
2013. As investor sentiments waned, the Indian Rupee
depreciated to an all-time low of 68.45 against the US
Dollar in August 2013. However infation has moderated
since November 2013 and came down to 25-month low
of 8.1%6 in February 2014. Currency volatility has also
moderated and stabilised at current trading range of 60-62
and 48-50 against the US Dollar and Singapore Dollar
respectively in the last six months.
The growth in exports and decline in imports led to a
contraction in trade defcit, which resulted in a reduction
of the Current Account Defcit (“CAD”) to US$31.1 billion7
(2.3% of GDP) in April-December 2013 from US$69.8
billion (5.2% of GDP) during the same period last year.
While economic growth in FY13/14 has disappointed,
India continues to attract considerable Foreign Direct
Investment (“FDI”) with its large consumer market,
growing urbanisation and important policy reforms.
India was ranked 3rd most popular among global FDI
destinations after China and US.
1 World Bank,2012 2 Planning Commission, Government of India 3 Central Statistics Offce – Ministry of Statistics and Programme Implementation- 28 February 2014
4 Central Statistics Offce (“CSO”) – Ministry of Statistics and Programme Implementation 5 Reserve Bank of India 6 Central Statistics Offce – Ministry of Statistics
and Programme Implementation- 15 April 2014 7 Reserve Bank of India – Press release on 5 March 2014 8 United Nations Conference on Trade and Development
(“UNCTAD”)
The Indian Government has taken several key policy
initiatives to enhance the economic and investment
landscape. In April 2013, the Government introduced
revisions to the Special Economic Zones (“SEZ”) Act,
2005 to boost the development of SEZs. These revisions
provided reductions in minimum land area requirement
with graded scaling, introduction of built-up area
requirements for IT/ITES SEZs, and the introduction of
an exit policy.
The major policy reform introduced in FY13/14 was “The
Right to Fair Compensation andTransparency in Land
Acquisition, Rehabilitation and Resettlement Act-2013
(“LARR”). This bill is aimed at providing fair monetary
compensation, rehabilitation and resettlement to both the
land owners and people dependent on land, especially
rural land, by replacing the archaic Land Acquisition Act of
1894. Other key policy reforms include the introduction
of a new Companies Act in September 2013 (several
sections of which have been implemented) and the
relaxation of FDI limits in 13 key sectors which will open
up new investment avenues in the country.
There is optimism in terms of economic outlook in
FY14/15, as businesses are upbeat about the new
government post the general election. Improving
international trade defcit, softening infation and the
stabilisation of currency are likely to bring positive
reinforcement to the economic outlook. However the
high interest rates, weak monsoons and infation are
very realistic concerns for the economy.