Explore India's Economy and Financial Markets
Discover India's economic and financial performance, which has been filled with high growth rates. While the country has some problems, it has been taking a proactive approach to promote foreign investment to further grow the country's economy and achieve its future goals.
Economy
India has recently been seeing growth and expects to become the 3rd largest economy by 2027.
Problems
India has faced difficulties in incorporating its workforce in their respective expertise areas. Also, there is a consumption inequity, where the top 10% consumer more than the bottom 90% (supported by a Gini Index of ~35). Lastly, wage growth has remained largely stagnant over the past decade.
Solutions
India has been taking initiatives to try to resolve some of the issues it is facing. For example, the government is trying to make case for foreign investment. Recently, India's finance minister, Nirmala Sitharaman, pitched to a large group of pension funds and institutional investors in the U.S. to take advantage of the country's investment opportunities -- in hopes to inspire some FDI and job creation for the nation's underutilized workforce. With FDI, the country would be able to see gains that would likely result in wage growth, which would effectively lead to foreign investors' success -- as the rise in wage will result in more money coming back to firms and organizations.
Net-Zero Climate Policy
India aims to have net zero carbon emissions by 2070 which is beneficial to foreign investors, because it will promote sustainability and allow companies to promote their products as sustainable and ethically produced. Overall, this initiative will make the nation's economy stronger and help reduce the country's pollution -- leading to a healthier and more vibrant workforce.
Currency Conditions
The exchange rate between the Indian Rupee (INR) and the US Dollar (USD) is currently 84.07 INR = 1 USD. This exchange rate has fluctuated very little, staying between 83.48 INR/USD and 84.125 INR/USD for the last 3 months and is not very volatile in the short term.
Financial Market
Booming Stocks
India has very healthy markets -- suggesting investments in equity markets as opposed to bond markets. One of the country's main index, NIFTY Next 50, has seen almost 350% growth over the last 10 years. This suggests a strong & rapidly growing stock market​, healthy economic environment, and positive investor sentiment​. For potential investors, this indicates that there is good potential for high ROI (Return on Investment).
NIFTY Next 50 5Yr Performance
Inflation Rate
Inflation
India has yet to cut interest rates due to persistent inflation and economic growth. The Indian Government expects to evaluate the financial metrics such as unemployment rate and inflation to see whether December rate cuts are viable. As of right now, cutting interest rates is an unviable option since persistent inflation could lead to even higher growth and inflation -- hence reducing the country's purchasing power.
Challenges
Food inflation is very high. Currently, inflation for vegetables is at 36%, and inflation for food & beverages is at 8.4%. However, fuel and light inflation is at -1.4% -- suggesting deflation. India's monsoons and weather related natural disasters have been troubling for the country as much of the crops have been destroyed. This has resulted in high food costs and is a challenge for the country to resolve in the near future as it thinks about potential rate cuts.
