What's Driving Indian Economy Towards $5 Trillion - Part 1

6 Aug 2019by Research and Ranking

What's Driving Indian Economy Towards $5 Trillion - Part 1

A lot has been spoken in the recent past about India to achieve the $5 Trillion by 2025 & $10 Trillion economy by 2030-32. But how is the big question people have in their minds.

Here is some analysis around what we feel could be the biggest drivers on the path ahead.

Let us start with the auto sector – this has been one sector that has got hit over the past few months.

Going into the history, here is how the auto sector has seen growth over the path 10 years.

Indian Economy

In the graph above, it is extremely evident that the auto sector has had a great growth run over the past 20 odd years. From being much less than 100,000 vehicle sales a month in 2002 to rising 4 fold at around 400,000 vehicle sales a month. The graph also shows that the ride hasn’t been a smooth one. But every time there has been a fall, we can almost always see the jump in at a faster pace almost right away in the following few months.

Currently, the auto sector contributes more than 7% to India’s GDP. The Automotive Mission Plan (AMP) 2016–26 aspires to increase this contribution to 12 percent and targets the growth of 3.5 – 4 times the current value of $ 74 billion to $ 260 billion – US$ 300 billion by 2026 and also provide approximately 60 million jobs until then.

As per the report by McKinsey, India is expected to emerge as the world’s third-largest passenger-vehicle market by 2021. The drivers behind this growth can be attributed to urbanization, an increase in consumption class and reforms and regulations initiated by the government.

Now imagine this, we live in a young India today. Undoubtedly, we all have dreams and aspirations. As soon as we get jobs, as soon as we get increments, as soon as we start or expand our businesses, we all think of either buying our first car or a bigger car. Yes, there can be a small slowdown, but will the young Indian stop buying cars & two wheelers? The answer is a big fat NO!

Along with this, we have the government working towards doubling farmer income by 2022. If this actually happens and it will in turn boost consumption in the rural India as well. The Indian rural market is still a relatively untouched market, and one should not forget, almost 60% of India still stays in villages.

With India’s $5 trillion growth story intact, this sector is well-placed to leverage the burgeoning economy over the long run. And, due to the swelling of this sector in the next few years, many wealth creation opportunities shall open for Indian investors. 

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