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Indian Economy Overview

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Indian Economy Overview

November, 2011

The Indian economy has continuously recorded high growth rates and has become an attractive destination for investments, according to Ms Pratibha Patil, the Indian President. "India's growth offers many opportunities for mutually beneficial cooperation," added Ms Patil. "Today India is among the most attractive destinations globally, for investments and business and FDI had increased over the last few years," said Ms Patil.

The Indian economy is expected to grow at around 7.5 per cent, according to Dr Manmohan Singh, the Indian Prime Minister. The PM acknowledged Asia's emerging economies were "growing well" and were, "in fact, contributing to the recovery of the world economy".

The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Revised Estimates, was 8.5 per cent in 2010-11 representing an increase from the revised growth of 8 per cent during 2009-10, according to the monthly economic report released for the month of September 2011 by the Ministry of Finance. Overall growth in the Index of Industrial Production (IIP) was 4.1 per cent during August 2011.

The eight core Infrastructure industries grew by 3.5 per cent in August 2011 and during April-August 2011-12, these sectors increased by 5.3 per cent. In addition, exports and imports in terms of US dollar increased by 44.3 per cent 41.8 per cent respectively, during August 2011.

Over the next two years India could attract foreign direct investment (FDI) worth US$ 80 billion, according to a research report by Morgan Stanley. India has received US$ 48 billion FDI in the last two years. Considering the pace of FDI growth in India, KPMG officials believe that FDI in 2011-12 might cross US$ 35 billion mark.

In addition, India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India's goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009.

The Economic Scenario

  • A report titled, 'World Investment Prospects Survey 2009-2012' by the United Nations Conference on Trade and Development (UNCTAD) has ranked India at the second place in global foreign direct investments (FDI) in 2010 and expects India to remain among the top five attractive destinations for international investors during 2010-12
  • India Inc announced 177 mergers and acquisitions (M&A) deals worth US$ 26.8 billion in the first nine months of 2011. For the quarter July-September 2011, inbound deals worth US$ 7.32 billion were registered as against the deals worth US$ 2.65 billion in the previous quarter. Foreign institutional investors (FIIs) have invested more than Rs 41,000 crore (US$ 7.81 billion) in government papers and Rs 68,000 crore (US$ 12.95 billion) in corporate bonds as on October 31, 2011
  • The latest available data from the Reserve Bank of India show a 77 per cent jump in the FDI in the first half of the current financial year (April-September), compared to what was US$ 19.5 billion during the same period a year ago
  • The total amount of FDI equity inflows during financial year 2011-12 from April 2011 to September 2011 stood at US$ 19.14 billion aggregating to 74 per cent growth over last year
  • India's foreign exchange (Forex) reserves have increased by US$ 2 billion to US$ 320 billion for the week ended October 28, 2011, on account of revaluation of foreign currency assets, according to the weekly statistical bulletin released by the Reserve Bank of India (RBI)
  • The Government has approved fund raising worth Rs 60,950 crore (US$ 11.61billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011
  • India's merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago, according to Mr Rahul Khullar, Commerce Secretary. Exports in the referred period increased on back of demand for engineering and petroleum products, gems and jewellery and readymade garments
  • Private equity (PE) investments in India stood at US$ 6.14 billion in value terms, while the number of deals increased by 33 per cent to 195, during January-June 2011, according to data compiled by Chennai-based Venture Intelligence. The rise in the value of the deals so far (June 2011) recorded a growth of 52 per cent, as compared to US$ 4.04 billion raised last year
  • The Indian metals and minerals sector has received PE investments worth US$ 650 million in the first half of 2011, according to estimates by VC Edge. The metal making industry has attracted PE players; in addition the mining assets are also a major draw due to the sharp demand for ownership of raw materials
  • India currently holds the 12th position in Asia and 68th position in the overall list world's most attractive tourist destinations, as per the Travel and Tourism Competitiveness Report 2011 by the World Economic Forum (WEF). A study conducted by global hospitality services firm, HVS, to measure marketing effectiveness on Internet puts Karnataka Tourism's Web site in the sixth position in India
  • The wind energy sector has attracted foreign direct investment (FDI) worth Rs 1,510 crore (US$ 287.62 million) over the past three years. In the renewable energy sector, wind energy has emerged as the fastest growing category, according to Dr Farooq Abdullah, Union Minister for New and Renewable Energy

Furthermore, the Indian Railways has generated Rs 37,392.88 crore (US$ 7.12 billion) of revenue earnings from commodity-wise freight traffic during April-October 2011 as compared to Rs 34,337.11 crore (US$ 6.54 billion) during the corresponding period last year, registering an increase of 8.90 per cent. Railways carried 536.92 million tonnes (MT) of commodity-wise freight traffic during April-October 2011 as compared to 516.89 MT carried during the corresponding period last year, registering an increase of 3.88 per cent.