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Understanding The Indian Economy

Understanding The Indian EconomyThe strength of a country can be gauged by the size of its economy. There are economic policies, and then there is the will to execute those policies - India is blessed with both! There was a time when it was a challenge to conduct business here. However, thanks to the government’s ‘Make In India’ initiative the business environment is seeing a transformation. This initiative is spearheading the current growth drive in the country, and continues to instill confidence in India’s people, industries, and the countries that India conducts business with.
A June 2017 study by Harvard revealed that India’s GDP is estimated to grow at 7.72% till 2025; China’s GDP will lag at 4.41%.*

There are three dynamic Growth Engines, which are responsible for making India stand out in the world. And they are closely inter-linked to each other.
Meet the Three**.


The promise and the potential that cities offer are the chief reasons for scores of Indians wanting to move. Their arrival has expanded the city’s limits, and led to the creation of growth centers – complete with industries, housing, and places of entertainment.

As per the 2001 census, the urban population in India was 286.11 million – living in 5161 towns. The 2011 census has revealed a big rise in the urban population - 377.16 million in 7935 towns1 . This urban population is responsible for producing more than three-fifths of the country’s gross domestic product (GDP)2.


India’s Middle Class

The growth of cities in India has created a segment of the population that is increasingly becoming the key for future growth. Meet India’s middle class!

A study by Mumbai University revealed that the middle class in India doubled in size over an eight year period from 300 million in 2004 to 600 million in 2012. Additionally, the number of households with a disposable income of more than $10,000 has increased from around 2.5 million in 1990 to nearly 50 million in 2015.3

India’s Middle Class

By 2027, the middle class population in India will overtake that of the United States, Europe and China3. The rise of the middle class has also resulted in the household savings rate soaring. The rate virtually tripled in the eight years from 2005, with more Indians breaking free from poverty and having disposable income for the first time4.

India’s Middle Class


Consumer Spending

Urbanization, the rise of the middle class, and the availability of disposable income has made Indians empowered consumers. The Indian consumer is discerning, looks out for more value, and is comfortable making purchases online as well as in store.

In its report, Trading Economics has revealed that Consumer Spending in India increased to 18483 INR billion in the first quarter of 2017 from 17809.14 INR billion in the fourth quarter of 2016. It averaged 9987.55 INR billion from 2004 until 2017, reaching an all-time high of 18483 INR billion in the first quarter of 2017, and a record low of 4469.88 INR billion in the third quarter of 2004.

India’s Middle Class

Consumer spending is an excellent barometer of consumer confidence. India Brand Equity Foundation reports that the country hit a ten-year high and stood first among the 63 nations surveyed in the global consumer confidence index with a score of 136 points for the quarter ending December 2016. By 2025, India’s robust economic growth and rising household incomes are expected to increase consumer spending to US$ trillion5.