Is this India’s Decade & Modi’s Decade?

By Shreya Anurakti, Economist, Research Scholar IIT Bombay & Animesh Pandey, Founder, P-Marq

The headline Gross Domestic Product (GDP) growth number for the third quarter of FY24 released last week showed a remarkable 8.4 per cent growth surprising most economists and policy makers. This number convincingly heralds what many global analysts such as Morgan Stanley and Goldman Sachs have been pointing that this decade is going to be India’s decade.

The decade which started with a second term for Prime Minister Modi and the Covid pandemic has put India as the pre-eminent growth driver globally and the preferred investment destination among global investors. India’s 2024 forecast for 6.8 per cent growth rate is significantly higher than 4.6 per cent for China, a pivotal moment which has forced many global fund managers to shift from a China plus Asia strategy to a specific India strategy. This is will perceptibly increase capital flows to India.

Most Opinion Polls are converging towards a re-election for Prime Minister Modi. P-Marq tracker currently estimates NDA to cross the historic 400 Lok Sabha seats mark. With expectations of a repeat & stable government and the expected 3rd term for Modi, there is palpable excitement on the giant strides India will take in the next 6 years and the slew of policy reforms that are going to be unleashed to improve the investment climate laying the foundations for India to emerge as the 3rd largest economy over the next few years.

Recent report from various global analysts (Morgan Stanley, Goldman Sachs et al) point to a consensus view of India becoming a $8 Trillion economy before 2030, a feat achieved by only US and China, adding $500B+ per annum on an incremental basis over the decade in this process.

Key Pillars of the India story are:

Fastest Growing Economy in the World: India is poised to add $500B to India’s economy on an incremental basis over the remainder of this decade, more than doubling India’s economy by 2030

Image credit: @narendramodi/X.com

Expected 3rd Term for PM Modi with record seats: Most view Narendra Modi as among the top leaders of the world and his expected re-election has already driven record inflows to the stock market over the past 2 months as investors expect big bang reforms & outcomes across all sectors

India’s highly acclaimed Digital Stack: The first two terms of the Modi government went into a developing India’s unique public Digital stack – which has three layers: 1) the identity layer, backed by Aadhaar,2) the UPI payments layer, and 3) the consent and data empowerment layer, focusing on securely sharing data. This has made India the largest & most savvy Digital Economy of the world with on-going emerging innovations such as ONDC and OCEN etc providing a strong thrust to India’s economic trajectory.

The Big India Consumption Story: With India poised to cross $8Trillion, per-capita income will reach $5500+ within this decade setting the stage for a massive discretionary spending boom.

The number of households earning in excess of US$35,000/year is likely to rise fivefold in the coming decade to over 2.5cr by 2030. This will make India one of the biggest consumer markets for all the top brands of the world creating an incremental US$1.1trn incremental retail opportunity driven by e-commerce penetration doubling to 14 per cent by 2031. Also, 30 per cent of big-ticket and high value incremental global car sales over 2024-2030 is expected be from India

Make in India, PLI Scheme & Additional reforms to drive India’s Manufacturing Opportunity: A shift in government policy towards supporting investment, alongside the transition to a multipolar world & persistent global anti-China sentiment, is set to alter India's economic structure in this decade with manufacturing to emerge as the flagship beacon for growth. 

Image credit: @narendramodi/X.com

Manufacturing as a share of GDP is expected rise from ~15 per cent currently to 21 per cent by 2030, implying an incremental U$1trn manufacturing opportunity. India’s cost advantage in terms of labor with India’s labor wage rates being 70 per cent cheaper than China will further accelerate this trend.

India – The Rising Export Nation: As India's manufacturing base expands, this will create a spillover into its export market share. India’s global export market share is expected to more than double to 4.5 per cent by 2031, providing an incremental US$1.2Tr export opportunity. This implies that the size of the export pie (both goods and services) will cross US$2Tr by 2031.

India’s Equity Market Cap to cross $10 Trillion before the end of the decade: With the Indian growth story expected to dominate global headlines similar to what China did over the past 2 decades, most Global Fund Managers will increase their allocation to India, and as domestic participation from retail investors increases, India’s market can grow by more than 11 per cent annually, driving a steady upward trajectory for the stock markets.

Image credit: @narendramodi/X.com

In a nutshell, India’s political & economic journey appears to be peaking at the same time providing both stability, continuity, growth & optimism to the India Story. So, all trends point to Asli Acche Din Aaane Waale Hain.