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1 Economic Overview
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. The below chart highlights India’s GDP and
the GDP growth rate since FY03/04.
However, the Indian economic growth touched a decadal
low of 4.99% in FY12/13, due to a combination of
international and domestic factors including slowdown
in US and European economies, high infation and local
structural and policy woes. The gap between Consumer
Price Index (“CPI”) and Wholesale Price Index (“WPI”)
kept widening as the CPI infation inched closer to double
digits (11.16% in November 20133) and WPI infation was
6.16% in December 20134 . The Rupee fell to an all-time
low of 68.36 against USD in August 2013, compared to
54.835 in January 2013. As per Reserve Bank of India
(“RBI”), the country's Current Account Defcit (“CAD”)
was at an all-time high of 4.8% of GDP during FY12/13
as exports declined by 1.76% and imports increased by
0.44% in USD terms. However infation has moderated
since November 2013 and came down to 25 month
low of 8.1%6 in February 2014. Currency volatility also
moderated and stabilized at current trading range of 60-
62 and 48-50 against the US Dollar and Singapore Dollar
respectively in last six months. The growth in exports
and decline in imports led to the contraction in trade
defcit which has resulted in reduction of Current Account
Defcit (“CAD”) to USD 31.17 billion (2.3% of GDP) in
April-December 2013 from USD 69.8 billion (5.2% of
GDP) during the same period last year. India’s GDP
has grown by 4.6%8 in 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 a positive growth.
As per advance estimates from the Central Statistical
Organisation, India’s GDP growth for FY13/14 is expected
to be 4.9%.
There are several progressive indicators for the
economy at large, including Foreign Direct Investment
(“FDI”), large consumer market, urbanisation and
important policy reforms in the last 12 months in the
country. With growing urbanisation, 31% of the Indian
population currently is city-dwelling and by 2039, the
percentage is expected to touch 50%9. According to the
World Investment Prospects Survey 2013-15 report by
United Nations Conference on Trade and Development
(“UNCTAD”), India ranked 3rd most popular among global
FDI destinations after China and US.
In April 2013, the Government introduced certain
revisions in the existing Special Economic Zones (“SEZ”)
Act, 2005 through the Annual Supplement 2013-14
to the Foreign Trade Policy (“FTP”) 2009-14 to boost
the development of SEZs, which had started slowing
down due to the implementation of Minimum Alternate
Tax (“MAT”) and Dividend Distribution Tax (“DDT”).
The revisions provide reductions in minimum land area
requirement with graded scaling, introduction of built-up
area requirements for IT/ITES SEZs and introduction of an
exit policy.
The Right to Fair Compensation and Transparency in
Land Acquisition, Rehabilitation and Resettlement Bill,
2013, popularly known as the LARR Bill, was approved
by the Parliament in September 2013. This 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.
The Companies Act of 1956 was replaced by a new
Companies Bill in September 2013 and several sections
of the new act have already been implemented. Further,
there have been relaxations in FDI limits in 13 key sectors
including aviation, retail, insurance, telecom, etc. that will
open up new investment avenues in the country with
many frms vying to tap the Indian markets. Other archaic
rules like the Income Tax Act of 1961 are proposed to
be replaced by the Direct Tax Code to suit the needs of
changing times. RBI has issued two in-principle bank
licenses in the private sector, which will further boost
the growth of the banking industry. All these positive
developments are expected to attract investments from
domestic as well as international funds and boost the
real estate and its supporting sectors.
1World Bank,2012
2Planning Commission, Government of India.
3
Central Statistics Offce (CSO)-Ministry of Statistics and Programme Implementation
4
Ministry of Comme
rce and Industry
5
Reserve Bank of India (RBI) 6 Central Statistics
Offce – Ministry of Statistics and Programme Implementation- 15 April 2014
7Reserve Bank of India (RBI) – Press release on 5th March 2014 8 Central Statistics Offce – Ministr
y of Statistics and Programme Implementation- 28 February 2014
9
Ministry of Urban Development-December 2011
FY03/04FY04/05FY05/06FY06/07FY07/08FY08/09FY09/10FY10/11FY11/12FY12/13
GDP fgures are at factor cost at FY04/05 prices
Source: Planning Commission, Government of India
Gross Domestic Product (INR Trillion)
60
50
40
30
20
10
0
GDP (INR Trillion) GDP growth rate (%)
7.1%
9.5% 9.6%
9.3%
6.7%
8.6%
9.3% 6.2% 5.0%
8.0%
India: Economic & commercial
real estate overview