An ancient civilisation but a young nation – india 

We often forget that we are the largest democracy in the world.

We took 67 year to become US 1$ trillion economy and a little over 4 years to become US 3$ trillion economy.

 

Question arises what changed in India over these years?

  1. Real GDP has gone up in the past few years. Thus, more consumption in the economy. Size of GDP of India leaving some countries behind: Russia, Italy, Brazil, France, UK.
  2. A visible rise of the middle-class economy, particularly middle to higher class. As of 2021, Middle-class constituted 31% of population and will rise upto approx. 60% in 2047.
  3. In recent years Indians have got increased access to bank accounts, which has enabled the government to undertake much more targeted fiscal subsidies through direct transfers, making sure the benefeciaries are directly accessed instead of any via-media. One such success story is scripted through UPI which reached approx 10.24 billion transactions per annum.
  4. Unlike USA and China, India created a technology platform that is agnostic by imposing open architecture, fostering interoperability, and avoid dependence on any single technology stack.
  5. 2/3rd of India’s GDP is driven by domestic demand, which clearly shows the state of our nation. Our nation’s domestic demand is ahead of supply.
  6. Surge in Foreign Direct Investment to capitalize the demographic divident and free access to burgeoning Indian market.

Let’s understand how this foreign direct investment effected our economy 

India’s enormous growth can be largely attributed to substantial Foreign Direct Investment. If we dig deeper, we will discover India’s total inflow since independence amount to US$950 billion.

But, what makes the difference even more stricking is the rate of inflow. More than 50% of India’s net FDI inflows since independence have come in last 90 months.

If you breakdown this net FDI, this money inflow is from 162 countries in 8 years which came across 61 sectors.

The calculation shows 93% of the total FDI received, came through the open route (also known as automatic route). Variety of sectors which are open to FDI via automatic route are as follows:

  • Agriculture and Animal Husbandry
  • Infrastructure
  • Manufacturing
  • Mining and Exploration
  • E-commerce (Marketplace Model)
  • Pharmaceuticals (Greenfield Projects)

But, we have some sectors that remain prohibited for FDI such as:

  • Atomic Energy
  • Lottery Businesses
  • Chit Funds
  • Gambling
  • Real Estate Business (Excluding development of townships, construction of residential /commercial premises, roads and bridges, etc.)
  • Manufacturing cigar, cigarillos, cheroots, using Tabaco or any of its substitute)

FDI is not only about earning dollar, it’s about building trust in the economy. A trust toward people.

How pouring of foreign money affects Real estate:

  • Augment of Property Value
  1. Boost in demand for properties can be increased by an Inflow of overseas capital, raising the prices of real estate.
  2. This is particularly witnessed in major cities that attract international investors.
  3. High-end properties are mostly targeted by international investors, leading to the boom of luxury market.
  4. If we consider average property value in India that would be estimated to be 7500 Rupee per square foot.
  • Economic Impact
  1. Construction activity can be Enhance by investment, which will indirectly create jobs and Invigorate the local economy.
  2. Generation of High property tax revenue, giving government luxury to spend on transactions.
  3. India’s gross tax revenue, in 2023, was projected to be grown by 10.4% over previous fiscal year which accounts to 27.58 trillion rupees.
  • Currency flux

Exchange rate:

  1. Foreign Currencies value relative to local currency can affect layer of investment.
  2. Favourable value for exchange rate can attract lot of buyers and investors
  • Market Stabilization
  1. Foreign Direct Investment can lead to provide stability in a market by widening the investor base, reducing the dependence in local economic environment.
  • Demographic Shifts
  1. Change in demographic makeup of neighbourhood can be seen due to shift in foreign investment in the economy.

Why there is giant influx of foreign investment in India: 

Skilled labour force –

  • By 2047 India will have 21% of world’s workforce.
  • With 30 people moving to the cities per minute , India will create USA in 10 years
  • Every year there is a large supply of skilled labour force in Foreign IT sectors, this can be witness by inward flow of foreign remittance.
  • Total inflow of foreign remittance in 2023 is estimated to be $125 billion.

Government reforms –

  • RERA –
  1. Real estate regularity authority.
  2. This reform was introduced in the year 2016.
  3. Function –
    • Ensuring transparency and accountability.
    • Easing FDI norms (allowing 100% FDI under automatic route in construction development project)
  1. For affordable housing relaxing FDI rules
  2.  Initiative in forming smart cities mission and housing for all
  • REITS –
  1. Real estate investment trusts.
  2. Allowing large scale investment
  3. It’s a company that typically owns and operate income-producing real estate
  4. REITS does not develop real estate properties to resell them. Instead they buys and develops properties with prime object to operate them as part of its own investment portfolio.

Beside this, many other government reforms have also been introduce to enhance real estate.

  • Large growing markets-
  1. Luxury market to be increased by $85 billion (projected) by 2023.
  2. Sectorial growth is been evident in sectors like software and hardware, construction, Service, trading, and telecommunications.

Such reasons and many more shows why India deserve this huge amount of influx.

In summary 

India remain one of the most open economies on the planet with private sector and global partners having the ability to play a role. The number of opportunity India present is unmatched. Growth is inclusive.

A clear statement can be stated – the India’s unprecedented transformation has just begun!!