On our recent trip to India we navigated through fog in Delhi, sat in standstill traffic in Bangalore, and witnessed the spectacular expansion of the Bandra Kurla Complex in Mumbai. The excitement in the business community was palpable, with great optimism with India’s new government, led by Prime Minister Narendra Modi.
India is the 10th largest economy in the world and appears to be in the midst of making a pivotal turn towards spectacular growth. The IMF released estimates predicting that India’s economy will grow at 7.5% in 2015. This puts India’s projected growth ahead of China’s estimated growth at 6.8%, making India one of the fastest growing emerging markets in the world.
The business environment in the past couple of years has been stifled partially by the political situation. Last year, India ranked only 142nd of 189 economies in the World Bank’s Ease of Doing Business rankings. However, when Mr. Modi took office as the new Prime Minister in May 2014, he pledged significant economic reform and has made it a priority to improve India’s infrastructure, cut bureaucratic red tape, and rekindle foreign investments to boost growth and improve standards of living.
In January, the medical device industry was opened to unlimited foreign direct investment, a sweeping change to the industry, which previously required a lengthy process to receive prior approval from the Foreign Investment Promotion Board. This is expected to accelerate growth of domestic medical manufacturing, which is likely to transform the medical device sector, already worth $6.3 billion, and growing 10-12% before the regulatory change.
At the same time, the government also taken steps to stabilize inflation. Retail inflation eased from 11% in November 2013 to 5% in December 2014. Since inflation is now under control, the government has turned its focus towards economic growth. In January 2015, The Reserve Bank of India lowered its core interest rate in its first rate reduction in nearly two years.
The healthcare sector in particular, is one of the fastest growing industries in India. It is expected to grow at a compound annual growth rate (CAGR) of 20% from 2012 to 2020, reaching $280 billion in 2020.