In early 2020, when the world struggled to contain the spread of the Covid-19 virus, India closed its borders on the 24th of March, 2020, by declaring a 3week nationwide lockdown for its 1.3 billion residents. The lockdown brought the economy to a halt, as public movement was restricted, factories shut, and all mobility stopped.
An enormous task lay before the Indian government to contain the spread of the virus on one end and fight the fragile economy on the other. In May 2020, the lockdown was lifted with modified restrictions, however, the economic fallout from the lockdown had been massive and unprecedented. The three-month lockdown sent the economy into its worst ever contraction of -24% in the second quarter of 2020, followed by a -7.3% shrinkage from July to September, pushing the economy into a rare recession. The suspension of operations had affected different sectors and regions differently, but most organizations faced massive challenges to regain economic momentum. It was essential to put into effect a well-planned and organized strategy for India’s economic recovery.
India took massive leaps to gain back the economic momentum and showed a gradual economic recovery from September to December 2020 with GDP growing at 0.4%.
In early January 2021, India launched its vaccine drive, the world’s largest inoculation program. The country’s drug regulator had permitted two manufacturers i.e. Bharat Biotech and Serum Institute, both of which being home grown, government backed vaccines. By January 2022, India had already inoculated 75% of its adult population with at least two shots against COVID-19.
The government made great efforts in order to catalyze India’s transformation and allow for greater ease of doing of business by launching several initiatives including the Gati Shakti National Master Plan and the Atmanirbhar Bharat mission. A wide range of development agenda support initiatives across multiple sectors were launched including reforms to consolidate multiple and disparate labour laws, by eliminating 75,000 compliances and 1,486 union laws, opening up wider limits in FDI, the drafting of the Insolvency and Bankruptcy Code, and initiating banking reforms.
The Indian economy has seen a sustained recovery since the second half of 2020-21. This is on account of most of its population being vaccinated and the attainment of a herd immunity.
There has been exponential growth and potential for investment in India, given its untapped rural economy, infrastructure, and industrial production, along with its IT and startup landscape.
The key areas of focus for growth are on the digital economy and fintech, tech-enabled development, energy transition and climate change. The government backed policies have enabled the growth of the Digital India Initiative, attracting a sizable talent pool.
From a recent survey of the inflow of FDI to India, during the year of 2021, there has been an increase in start-up companies and IPOs. Data has shown that a total of 63 Indian companies raised an all-time high of Rs 1,18,704 crore through mainboard IPOs in 2021 and 44 new startups have been elevated to unicorns last year with Indian startups receiving a capital inflow of $39 billion in 2021. The e-commerce sector has also grown exponentially especially in tier-2 and tier-3 cities that have shown high consumption patterns over the last 2 years.
In spite of the ongoing Covid-19 pandemic, the Indian Government made amendments to various sectors in the Foreign Direct Investment Manual so as to welcome more and more investments. The Indian government continued its liberalization efforts on foreign investment regulations in the sectors such as (a) the defense sector limit increased from 49% to 74% (b) the Insurance sector limit increased from 49 % to 74 %, under the automatic route (c) in single brand retail trading, the local sourcing regulations were further relaxed for 100% foreign investment (d) In digital media, up to 26% foreign investment is permitted with prior Indian government approval even for entities engaged in uploading / streaming of news and current affairs through digital media platforms.
Furthermore, the Indian Government in the view of the damage caused to the economy due to Covid-19, decriminalized various offences under the Companies Act. The Companies Amendment Act 2020 removed a number of offences dealing with non-compliance of various provisions of the Indian Companies Act including for the winding up of companies, correcting the registers of security holders; and the redemption of debentures.
A number of other violations which earlier provided for imprisonment and criminal fines have been replaced with civil penalties. In addition, there has been a rationalisation of certain civil penalties depending on the seriousness of the violation so that more serious violations have had their civil penalties enhanced while other violations now have lower civil penalties. A further innovation is the adoption of lower fine amounts for start-ups.
The current transformation in creating new global platforms, with cloud computing and digital data flows, have been reflected in the emergence of nearly 12,000 digital tech startups in the last two years in India, with new opportunities spanning to such areas as data-driven lending and insurance payments. Many of these digital innovations hold great promise for a new type of globalization, in which the division of labor and resulting services can move freely from firms in developed countries to Indian firms. India’s path-breaking efforts in space technologies at a very low cost is also an opportunity for other countries to launch educational satellites, global navigation channels, broadband spectrum and other related projects.