Does India have potential for investors?

India’s economy is the third largest in the world in terms of purchasing power parity and the sixth largest in terms of nominal GDP. India is also one of the major G20 economies, with an average growth rate of around 7% over the past two decades. In the last quarter of 2014, it developed into the fastest growing major economy in the world, outperforming the People’s Republic of China. Although the two countries had very similar growth rates in 2016, it is forecast that China’s growth will slow, but the Indian economy will grow back to 7.2% in 2017. According to a PWC report The World, India’s nominal GDP could surpass that of the United States by 2050 by 2040. The report also predicts India’s GDP will double to $ 5 trillion by 2025.

There are several main reasons for India’s positive long-term growth prospects, including the relatively young population (with a correspondingly low nursing care ratio), healthy investment and savings rates, and increasing integration into the global economy. The Indian economy is believed to become the third largest over the next decade and one of the two largest by mid-century.

Another reason why India’s economy has grown faster than that of other countries is likely to be the increasing government investments, which incidentally also play an important role in the world’s second fastest growing economy – China. Meanwhile, slow-growing Western countries rely mostly on private rather than government investment.

India’s service sector is one of the fastest growing in the world, growing 9% every year since 2001. India has become a major exporter of Business Process Outsourcing (BPO) services, software and IT services – the latter are the largest private employers in the country. India also has the fastest growing number of internet users in the world, which shows the huge potential of e-commerce in India. Flipkart and Amazon are the best examples of ecommerce success in India. India is also the third largest start-up hub in the world, with more than 3,100 tech start-ups in 2014-2015.

With the diversification and growth of the Indian economy, the contribution of agriculture to the country’s GDP has been steadily declining since 1951, but it still plays a significant role in the country’s socio-economic development and is one of the largest sources of employment. India currently ranks second in the world in terms of agricultural production.

Foreign direct investment is currently an important engine of economic development in India. Foreign companies are investing in fast growing private companies to benefit from lower wages and an emerging business environment. India is extremely attractive to foreign investors. In fact, it outperformed the US and China as the top FDI destination in the first half of 2015, attracting $ 31 billion, compared to $ 27 billion in the US and $ 28 billion in China.

Among other things, the service sector has been attracting a large proportion of foreign direct investment since 2011. The service sector includes finance, banking, insurance, non-financial business services, outsourcing, research and development, courier services, and technology testing and analysis. In fiscal 2014-15, the service sector attracted $ 3.25 billion, which is 17% of total FDI.

The service sector is followed by construction development (new settlements, residential construction, urban development and infrastructure) with 2.89 billion USD with 2.20 billion USD in FDI in the same period.

5 thoughts on “Does India have potential for investors?”

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