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India market and business update: June 2024

19 June 2024
This month's business update focuses on India's economic momentum as it forges a new chapter in its path to economic superpowerdom following the country's election results.

A new government, but the same economic fundamentals. India's future remains bright with economic momentum predicted to continue through 2024-25 and beyond.

With the dust starting to settle following the conclusion of the world's largest democratic elections, and a new government now formally sworn in, the outlook on India's economic future remains bright. The country is projected to be the fastest growing economy in the G20 this year and is, according to an S&P Global report, likely to become the third largest economy in the world as soon as 2030. Moody's and Deloitte forecast that India’s economic momentum will continue throughout the fiscal year 2024-25 at 6.6% GDP growth, following growth of 8.2% in the fiscal year 2023-24 (as published by India's finance ministry).

Speaking on 18 May 2024 at the 'Confederation of Indian Industry Annual Business Summit 2024' held in New Delhi, Amitabh Kant (G20 emissary for India) said that structural reforms, digitisation, focus on infrastructure creation and climate action in India have elevated it from the 'fragile 5' to the 'top 5', fuelling a reported growth rate of 8.4% in the last three fiscal quarters. He stated his expectation that '30 per cent of global GDP growth will come from India between 2035-2040'.

India's performance in a variety of areas underpins this continued confidence in its economy. A few of these are set out in more detail below.

Loan capital markets

India's capital markets have been buoyant. On the equity side, India is ranked as one of the most active markets in the world for initial public offerings (IPOs). A total of 31 Indian companies launched Mainboard IPOs from 1 January to 31 May 2024 according to capital markets data provider Chittorgarh, up from 6 during the same period last year. Consequently, the total market capitalization of India’s stock markets rose to around US$5 trillion for the first time on 21 May 2024, surpassing Hong Kong and France to become the fourth biggest market in the world.

Debt capital markets have also performed impressively, with global investors demonstrating their appetite for opportunities to increase their exposure to India’s sovereign bonds (as at 13 June 2024, the 10 year government bond is trading at 6.9%). Demand is expected to remain high, with India set to join JP Morgan’s emerging market bond indices for the first time on 28 June 2024. This is forecasted to drive between US$20 billion-US$22 billion of additional inflows into the Indian bond markets.

Borrowers have options

Offshore dollar-denominated debt markets and local rupee-denominated debt markets have both been open for business. Domestic currency debt markets have been particularly active, given the high inflows of capital from international and domestic investors into rupee-denominated funds and assets. Equally, international currency debt markets have been active in 2023-24, with registrations, disbursements, and net inflows substantially higher than fiscal year 2023 levels.

Reverse flipping

The growing appetite of international and domestic investors to invest in India's capital markets is leading to a trend of 'reverse flipping.'  India start-ups that once used to move abroad for capital markets access are now returning to India. It is a complex process, but companies such as Groww, Pine Labs and Razorpay have made the return to India and it is rumoured that Flipkart (India’s biggest e-commerce company, now part of Walmart) is preparing to flip back, ahead of an IPO.

Looking forward

Taken together, the economic indicators are clear: India's economy continues to rumble on towards economic superpower status at a breakneck pace. This will present exciting opportunities both for businesses in India, and those around the world looking to expand into new and dynamic markets.

DWF is a leading legal adviser to Indian and India-focussed companies, financial institutions and high net worth individuals and families. Our India Group, consisting of over 95 lawyers from 15 countries, 13 practice areas and 9 sector groups, is one of the largest India groups of any international law firm located outside India.  With decades of extensive expertise in guiding Indian clients in respect of outbound legal work, our team of experts and specialists empower both India-focused and India-based clients to achieve their strategic objectives. If you have queries on any of the issues covered in this article please contact one of our experts.

We would like to thank Jagdeep Lall and Surya Kumaravel for their contribution to this article.

Further Reading