India on sound financial footing

By GYNNIE KERO
INDIA has robust financial and capital markets, stable regulatory regime, abundant supply of labour and consumption-driven economy which are attractive investment for sovereign wealth.
Ernst and Young PNG partner Madhu Nair said India had an economy with a largely self-sufficient agricultural sector and diversified industrial base and service sector.
He said India’s GDP had been growing at an average rate of 8.5% for the past five years.
“This is higher than the world’s real GDP growth rate which averaged at 4.3%,” Nair said.
“However, real GDP growth declined in FY12 to 6.5% because of the global economic slowdown.”
Nair highlighted this during a discussion on India’s current economic situation, fiscal and monetary management, deficit control and possibility of further investment in PNG.
“As compared to other countries, India has been and continues to be relatively insulated from external shocks due to its strong domestic consumption pattern and savings culture,” he said.
“As the rate of savings improves, the level of investment within the economy will also increase.
“Private domestic consumption accounts for approximately 55% of the country’s GDP and is one of the key factors driving overseas investments in the country.”
The services sector attracted the highest amount of foreign capital in India, totalling US$32.8 billion between April 2000 and April 2012.
The country’s foreign exchange reserves stood at US$287.4 billion as of June 8, 2012.
Industrial contribution to GDP in India stood at US$452 billion in FY12, up from US$424 billion in FY11.
Nair said India had a robust, transparent and stable financial market, which had gradually transformed from a highly-controlled system to one that was liberalised.
“As of FY11, public sector banks dominated the banking industry with 74% of the assets held,” he said.
“However, private sector banking is growing rapidly with 11,602 branches at the end of FY11.
“The Reserve Bank of India (RBI) has recently proposed granting new banking licences, which will promote private banking in the country.
“The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are the premier stock exchanges of India.
“India accounts for 1.8% of global trade in goods and services worldwide.
“In 2010, India’s share of trade in commercial services reached 4.3% of global trade, compared with 2.8% five years ago.
“India’s exports grew by 33% in 2010, making it the country with the most-dynamic growth.
“Moreover, India’s exports accounted for 1.5% of world merchandise exports, whereas India’s imports accounted for 2.2% of world merchandise imports in 2010.”
India’s key exports include gems and jewelry, petroleum, engineering goods, textiles, drugs and pharmaceuticals.
Import of all commodities is free in India, except for items regulated by any law or policy in force.