Against an extremely uncertain global backdrop and rising geopolitical risks, India has increasingly been in the spotlight as the fastest-growing major economy.
I am highly optimistic about the future of our economy. India’s economic growth has exceeded global expectations, driven by a confluence of factors such as sound government policies, strong macroeconomic fundamentals, inherent domestic demand, timely regulatory interventions, and ongoing reforms that have ensured long-term growth.
India’s key differentiating factor is its scale and pace of growth. It took India 60 years to become a $1-trillion economy in 2007. The next major leap came eight years later in 2015 when the Indian economy doubled to $2-trillion. Since then, growth has accelerated dramatically despite the brief disruption caused by Covid-19.
By the end of this year, India will be nearly a $4-trillion economy and is well on its way to becoming the world’s fourth-largest economy by overtaking Japan.
Foreign investors are recognising India’s growth potential. India’s GDP grew by 8.2% for FY24 and is projected to grow by 7.2% in FY25. This compares with a GDP growth rate of around 4% for all emerging markets and an even lower growth rate for the developed world.
In my view, both the government and the Reserve Bank of India (RBI) have done an outstanding job in managing the economy over the last four years. This has significantly contributed to India’s position as the fastest-growing major economy in the world.
I genuinely believe that there is no better place to be than India right now. I regularly engage with international investors, and their feedback about India is overwhelmingly positive. Foreigners are increasingly seeing India as the new growth engine of the world economy. Moreover, India’s image has improved significantly over the last decade, largely due to efforts to enhance the business environment through greater transparency and a stable, fair regulatory framework.
India’s strength in the global economy is underscored by the fact that no other economy today has the capacity to absorb the scale of investments that India can or offers the growth potential that India provides.
With its vast consumer base, young workforce, expanding middle class, and a rapidly evolving technological landscape, India presents an investment environment that is both scalable and sustainable. This unmatched capacity positions India as a critical player in shaping the global economic future, attracting long-term commitments from investors worldwide.
I am confident that India’s pace of reforms will continue. Sound regulatory policies and the implementation of structural reforms will help India achieve even faster economic growth in the years ahead.
We need to remember that the key to sustained growth and long-term success is good governance. Corporate governance is often seen as a measure of how well companies are run. Investors use it as an indicator to gauge the quality of a company’s management and the effectiveness of its board.
It is now widely accepted that sound governance principles are essential for long-term development and sustainability. Companies and independent directors are increasingly responding to demands for accountability by better aligning themselves with the spirit of the rules and regulations. A majority of Indian companies understand that robust corporate governance is essential for their development and sustainability. Value-driven governance enhances their worth as they seek to distinguish themselves from competitors.
Global investors are extremely cautious when identifying companies to invest in, with good governance being one of their primary focus areas. These investors are willing to pay a premium for companies where governance practices are perceived as strong.
As a result, most Indian companies recognise that robust governance carries a premium and that failing to meet high ethical standards exposes them to serious reputational risks and potential business failure.
Boards play a crucial role in collaborating with management to identify weaknesses and address areas for improvement. The board serves as the company’s stewardship body, guiding and supporting management, especially during challenging times, and ensuring that the company emerges stronger and more resilient.
Commitment to good governance provides a distinctive competitive advantage, enhances reputation and investor trust, and ensures long-term sustainability. Organisations must focus on prudence and long-term growth, regardless of economic cycles. By focussing on sustainable practices companies can build a robust foundation.
I am confident that corporate governance practices in India will continue to improve, enabling easier access to global capital markets and greater transparency.
The author is former VC and CEO, HDFC Ltd. Views are personal