India’s economic growth: Standing out globally

India is one of the strongest growing economies in Asia, driven by digital transformation, robust consumption and expanding exports.

Its economy is being buoyed by a young workforce, a population that is becoming more affluent and government policies that are creating a manufacturing renaissance. The country is standing out on a global stage, and in 2024 its economic growth rate surpassed other Asian nations.  

Growth is anticipated to continue. Between 2025-2029, India’s GDP forecast is expected to be more than 6%, making the country one of the largest and fastest growing economies in the world.¹  India is getting too big to ignore. 

Economic indicators have shown the economy is stable. Inflation data is within the central bank’s target range and under control.  

Strong corporate earnings have led to increased investment, hiring and spending. Earnings  have kept a pace with growth in the economy. Market consensus has predicted that earnings growth for 2024-2025 will be in the double digits at around 14-15%.²

The sectors driving the economy can be seen in the Nifty 50 index. This index comprises of the 50 largest stocks on the National Stock Exchange. Since its launch in 1996 the index constitutes have changed as to how the economy has expanded. It includes stocks involved in digital transformation like financial services, as well as manufacturing and consumption.

So, what’s behind the economic growth?

India’s domestic market is booming

More than 60% of India’s GDP coming from domestic private consumption. By 2026 the country is expected to have the third largest domestic consumer market, outpacing Germany and Japan.³

Demand for goods and services is outpacing supply. For companies pricing power is improving, resulting in stronger earnings growth.

The county has a highly educated young workforce, with 65% of its citizens under the age of 35.⁴ They are helping to fuel productivity and innovation in the workforce.

As more people have joined the workforce a burgeoning middle class is emerging. They are spending money on premium goods and services, automotives, leisure and entertainment.

One spending area that is surging is tourism. By 2030 the country is projected to be the fourth-largest global spender in the world, with expenditure on domestic tourism likely to rise to more than 170%.⁵

Digital transformation creating opportunities in the economy

Improvements in the country’s digital financial infrastructure have enabled significant growth opportunities for the country in e-commerce.

In 2016, the National Payments Corporation of India (NPCI) developed the Unified Payments Interface (UPI). This is a payment system that facilitates money transfers between people and merchants through a mobile app.

UPIs have made it easier to transfer payments between two parties and has been a crucial driver of e-commerce in the country. India has now emerged as the global leader in this field, with digital payments surging to 135 billion in 2023 from 46 billion in 2021.⁶

Exports being boosted by FTAs, capital expenditure and industrial policy

There’s been increasing global demand for products made in the country. Over the coming decade it’s expected India’s exports will triple,⁷ with key exports in electronics, IT exports and defence.

Contributing to this growth has been free trade agreements (FTAs). Compared to other emerging markets, India has good FTAs. For instance, India has 13 FTAs, that helps make its goods more competitive in global markets by reducing tariffs and non-tariff barriers.⁸ This has given the country an edge over other emerging regions.

Government policy has been encouraging international companies to set up manufacturing bases in the country. These include the Make in India and the Production Linked Incentive (PLI) schemes.

Additionally, the Production Linked Incentive (PLI) scheme has attracted investments and increased production capacity in multiple sectors. The PLI scheme has led to a notable increase in the production of large-scale electronics, pharmaceuticals, and automotive components, allowing India to grow on trade export and reduce the reliance on imports.

The improved trade infrastructure and favourable policies have also attracted foreign direct investment (FDI), further boosting export-oriented industries. Companies have relocated their supply chains to India and are taking advantage of their increasing skilled labour force.

Overall, India’s economy is starting from a low base, offering ample opportunities for improvement. In the coming years we anticipate a sustained high level of growth.