India aims to become a developed nation by 2047—priorities Modi cannot ignore

Over the past two years, Prime Minister Narendra Modi has confidently talked about his ambitious goal Make India a developed economy by 2047.

All eyes will now be on Prime Minister Modi and his Bharatiya Janata Party-led coalition to see if they can maintain economic momentum and economic development. continues to improve the lives of millions of people for their third consecutive term.

Confidence in the BJP has declined. Modi’s ruling party failed to win an outright majority in the House of Representatives for the first time since 2014 and is now forced to rely on coalition allies.

Reema Bhattacharya said: “The government will have to find common ground and build consensus on many fronts, not only with coalition partners but also with other stakeholder groups, to push for the adoption of the important legislation in Congress and quell growing anti-incumbency sentiment nationwide.” head of Asia research at risk intelligence firm Verisk Maplecroft.

“Failure to do so could also lead to further political defeats for the ruling party in the next round of state elections scheduled for later this year,” she warned.

Analysts say that the coalition led by Mr. Modi will not affect India’s economy and development. However, they point out that the new government will now have to restore confidence in the people and ensure India’s position in the global South is maintained.

The new government has yet to outline its main priorities. However, analysts predict that these four areas will be high on the agenda.

India has gone through one Big infrastructure push and there have been significant strides in connecting and modernizing highways, railways and airports.

Last year, consulting firm EY projected that India will become a $26 trillion economy by 2047and emphasized that building the country’s infrastructure capacity will be key to making this a reality.

Samir Kapadia, CEO of India Index and managing director at Vogel, said: “Since Modi took office, he has been working hard to build ports, railways and all the kind of hard-wearing infrastructure that keeps business running smoothly. He will redouble that effort.” Group.

India still lags behind China in this area and more needs to be done if it is seeking a high growth trajectory to continue attracting foreign investors.

In interim budget In February, Finance Minister Nirmala Sitharaman estimated capital spending would rise 11.1% to 11.11 trillion Indian rupees ($133.9 billion) in fiscal 2025, mainly focused on construction railway and airport.

But improving connectivity between cities is not the only area of ​​focus, noted Santanu Sengupta, India economist at Goldman Sachs.

“Besides creating physical infrastructure, India needs to be consistent with structural reforms… It needs to look at land and expand its land bank to set up more infrastructure,” Sengupta told CNBC. for factories”. in this field.

However, analysts stress that the government may face opposition in this regard as Modi’s weak hand could make acquiring land for projects more difficult.

“Such goals could be more difficult if state-level parties gain power,” said Richard Rossow, senior adviser and chair of US-India policy studies at the Center for Strategic and International Studies. The veto was largely due to the coalition structure.”

Forecasts from Counterpoint Research and the Indian Electronics and Semiconductor Association show India’s semiconductor industry will be valued at $64 billion by 2026tripled from 23 billion USD in 2019.

“This will probably be the biggest breadwinner for India in the next five to 10 years,” Kapadia said. “Modi firmly believes that if India can get into the semiconductor manufacturing business, and if he does it right, India can become a frictionless economy.”

Unemployment is currently one of the biggest problemsThe world’s most populous country is facing a skills mismatch that is exacerbating the problem, said Sumedha Gupta, senior analyst at The Economist Intelligence Unit.

“There has been a mismatch between the skill levels of domestic workers and the high demand for innovation from employers,” she told CNBC. This will certainly persist into this decade, possibly into the 2030s.”

The unemployment rate in India rose to 8.1% in April from 7.4% in March. Center for Monitoring Indian Economy.

A survey conducted by the Center for Social Development Research in April before the election found that Unemployment is the top concern for 27% of the 10,000 people surveyed. More than half (62%) of those surveyed said finding a job has become more difficult over the past five years of Modi’s second term.

The new coalition government must now improve local education standards and skills-based training to ensure people get gainful employment in the right sectors, analysts stress.

Vivek Prasad, market leader at PwC India, said: “While those with advanced education and practical experience are ready to secure employment in this sector, creating opportunities Fair and widespread employment requires a more comprehensive approach.”

Prasad told CNBC that the new vocational education and training policies will “engage individuals at every level of the manufacturing value chain, ensuring that the benefits of economic progress are shared across society.” “, Prasad told CNBC, adding that promoting women’s employment is paramount to driving India’s growth.

According to data from the World Federation of Exchanges, the Indian National Stock Exchange has a total market capitalization of $4.9 trillion – the third largest in Asia-Pacific. India’s market capitalization is expected to increase 40 trillion USD over the next two decades.

Standard index Convenience 50 and Sensex according to LSEG data, has outperformed strongly this year – up 8% and 7% year-to-date, respectively.

However, analysts told CNBC that foreign direct investment into the country needs to accelerate to further boost economic growth and development.

Goldman Sachs’s Sengupta said foreign direct investment in India last year was relatively weak due to a difficult private equity funding environment due to high US interest rates.

“India is likely to attract more FDI inflows from the US once interest rates come down and the funding environment becomes easier,” Sengupta told CNBC.

Prabhat Ojha, partner and head of Asia client sales at Cambridge Associates, noted that the ease of investing in India also “has some way to go” to continue attracting sources. foreign capital.

He recommends that investors pay more attention to India’s banking sector – a sector that currently has good growth and good quality capital allocation.

“From 2017 to 2019, there was really a cleanup of Indian banks and they are in a very healthy state now,” Ojha told CNBC.