S&P Global Market Intelligence said on Monday that the new government will likely focus on job creation and addressing farmers’ concerns in its first 100 days.
“India’s recent parliamentary elections have resulted in Prime Minister Narendra Modi’s continued leadership, although the Bharatiya Janata Party (BJP) has lost its majority and now relies on coalition parties for stability and policy passage,” the research firm said in a note.
The Bharatiya Janata Party won 240 seats in the recently concluded national elections, falling short of the 272-majority mark.
The firm noted that India will likely continue its production-linked incentive (PLI) scheme to boost manufacturing. The PLI scheme covers 13 sectors and has benefits that extend until 2025.
“The success of the scheme, measured by increased exports in key sectors, is likely to result in its continuation. The production of Apple Inc.’s iPhone in India has helped drive total exports of phones 46 percent higher year over year in the past three months,” S&P Global noted.
The firm also highlighted that the demographic dividend, in the form of a large young labour force, allowed the country to expand manufacturing.
It cited higher operational risks in the form of labour and infrastructure disruption as impediments to growth.
India has been targeting an increase in manufacturing’s share of GDP to 25 percent from the current 16-17 percent.
“India’s advantages over the Association of Southeast Asian Nations (ASEAN) and other regions from a reshoring perspective range from a large domestic market to government support for long-term export growth, demography and wage costs, and lower operational risks in some categories,” the researcher said.
It also noted that India could quickly seal bilateral deals with the US, UK, and EU. India has signed four major trade and economic partnership treaties in the past five years.
“Volatility in shipping rates has led to a competitive advantage for Indian exporters but increased costs for importers, increasing the motivation for state-supported investments in ports and possibly an independent shipping company,” it noted.
India has been increasing the cargo handling capacity of its ports. The cargo handling capacity of Indian ports went up to 2,691 million tonnes per annum (mtpa) in FY24 from 2,378 mtpa in FY19. The government aims to increase it four-fold to 10,000 mtpa by FY47.
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