INTHEBLACK June 2022 - Magazine - Page 34
F E AT U R E : E C O N O M I E S S E R I E S
// I N D I A
“POLICYMAKERS MUST RECOGNISE AND ADDRESS
T H E R I S KS L O O M I N G O V E R P E N T- U P D E M A N D A N D
TA K E Q U I C K A C T I O N S T O P R E V E N T T H E S E FA C T O R S
F R O M S P I N N I N G O U T O F C O N T R O L .”
DR RUMKI MAJUMDAR, DELOITTE INDIA
with global ambitions is whether they can afford to
ignore the fastest-growing large economy in the world.
“India’s scale is extraordinary,” Sharma says. “By
2025, one-fifth of the world’s working-age population
will be Indian. By 2035, India’s five largest cities
will have economies comparable to middle-income
countries today. In short, there is no market which
offers more opportunities for Australian business over
the next 20 years than India.”
Sharma also expects emerging prospects in clean
energy, critical minerals, grains management and
logistics, as well as medical devices and vocational
education and training.
Deloitte has identified seven industries that
should attract strong foreign direct investment (FDI)
– electronic goods, pharmaceuticals, textiles and
apparel, food processing, automotive and auto parts,
chemicals for active pharmaceutical ingredients, and
capital goods.
Deloitte’s research suggests India can target
an additional US$1 trillion (A$1.4 trillion) of
merchandise exports in the next five years if it
attracts higher FDI into these sectors.
34 ITB June 2022
Majumdar adds that Indian exports have performed
“exceedingly well” and will continue to do so as global
economic activity picks up pace. She expects rising
consumer confidence to feed into a rebound in which
demand outpaces supply. “This will compel businesses
to increase investment and increase capacity to produce
more. In short, we expect a virtuous cycle to kick in.”
STRENGTHS AND WEAKNESSES
Capital Economics will be keeping a close watch
on the banking sector in 2022, with Aw noting that
banks entered the pandemic crisis with “very weak
balance sheets and weak profits”. He expects debt on
non-performing loans to increase, especially when
extraordinary government stimulus and support
measures are wound back. “If the banking sector just
doesn’t have the appetite to lend money, investment
will be held back,” he says
On a positive note, stock markets in India have
been performing well, with the NIFTY 50 benchmark
index up 24 per cent and the BSE Sensex 30 up
22 per cent in 2021. Aw says Indian equities also have
less exposure to regional forces. “For that reason, we