Growth Drivers for the Indian Economy in 2020

Which Sectors kept the Economy afloat?

Indian economy had experienced the worst ever set-back, with its GDP contracting at 23.9% in the financial quarter of April-June. As per a feature published in The Wire, the recorded GDP contraction was steeper than the USA and Italy, at 9.1% and 17.1%, respectively. However, by the end of 2020, the entire country is geared up for a quick revival.

As per RBI predictions, the shrinkage had stopped in the October-December quarter. The economy is in a revival mode with recorded GDP growth at 0.1% in the third quarter and a projected 0.7% between January-March 2021.

The Indian economy faced many problems in 2020 due to coronavirus infection and economic lockdown. Many businesses especially in the MSME sector have been affected, and are partnering with business accelerators to fund their business growth and expansion plans. These programs give access to angel investors, mentorship, and other support to these firms.

The journey towards economic liberalisation that India undertook 25 years ago, is giving it the much-needed resilience today. Though many businesses have faltered in 2020 in India, some sectors have done well.

Today we focus on five such sectors that have done exceptionally well. These are the sectors that drove business growth and sustained the country's economy through the rough weather.

1. Technology

The technology sector had a great year in 2020. As most of India was under lockdown, people looked up to their smartphones to work, watch Netflix, and of course, communicate with their loved ones. It became their window to the outside world. So, the smartphone business experienced a windfall this year.

Another theme that had a successful year in 2020 was edge computing. It is a type of distributed computing, similar to cloud computing, that brings computation and data storage close to the client’s site. Since it processes data locally, its advantages include lower bandwidth and reduced costs.

Artificial intelligence and machine learning are completely transforming businesses. Owing to the Covid outbreak, pharmaceutical companies are increasing their investments in AI R & D, in their search for breakthrough molecules. According to a market share report by Grand View Research, the global artificial intelligence market size was valued at $ 39.9 billion in 2019 and is expected to grow at a CAGR of 42.2% between 2020 to 2027.

The way technology is moving ahead, soon you might see robots rolling around in stores and scanning stock supply!

2. Service Sector

It is the fastest-growing sector in the Indian economy and is a key driver of India’s economic growth. As per an industry report by India Brand Equity Foundation, the sector contributed 55.39% to India’s Gross Value Added in 2020. According to Fitch Ratings, the Indian IT services sector is set to record high single-digit growth due to the increased digital transformations undertaken by businesses.

Many businesses have realised that a video call is a good replacement for a costly and risky trip. That is why the demand for apps like Zoom and WhatsApp have ‘zoomed’ in 2020! Most companies are holding virtual meetings through Zoom.

Companies that are in online delivery of products, especially food and grocery witnessed huge growth and demand since most people were unwilling to go out. In general, wholesale and retail trade have done well. Another important trend that we are witnessing is that consumers are now willing to purchase even big-ticket items like furniture or cars, without physically visiting the stores. Some business growth examples in this category include eCommerce giants like Amazon, Flipkart, and Snapdeal.

As a result of the lockdown, students and teachers have resorted to online learning to stay ahead of the learning curve. Technology is enabling the institutes to transition online and facilitate virtual assessments. According to an industry report by Global Markets Insight, the E-Learning market size was over $ 200 billion in 2019 and is expected to grow at a CAGR of 8% between 2020 to 2026.

3. Health and Nutrition Products

The Covid-19 pandemic has made the population more aware of health and wellness. Many home-grown ayurvedic and skincare brands like Patanjali and Up akarma Ayurveda have clocked more than 100 percent YOY growth in 2020. The rise in the aged population is another major factor contributing to the growth.

Due to the need for social distancing, many of these brands have undertaken a D2C approach in reaching out to customers, cutting out the middlemen and wholesalers. This has increased their profit margins. Post-lockdown a lot of people are buying online, and Amazon has been a great channel partner for these brands. Also, these businesses are using their social media handles and websites to promote themselves.

Food that offers health benefits in addition to nutrition is in focus now. The probiotic category has expanded across many foods and beverage categories like cookies and tonics, and not just in dairy. Since being vegan is seen as a sustainable way of living, some businesses are foraying into plant-based alternative dairy products.

Many people complain of gluten present in wheat, which causes digestive intolerance. So, brands are experimenting with plant-based flours as an alternative to wheat.

4. Healthcare Sector

A FICCI-KPMG report says that India’s burgeoning healthcare sector will be a $ 280 billion market by 2020, and is growing at a CAGR of a high 16%. So, this presents many opportunities for the sector. The increasing disease burden due to the rising population, pandemic, and other causes, though unfortunate, is giving the right impetus to this sector.

Technology-enabled patient engagement strategies like telemedicine are providing dual benefits. One, they enable healthcare to be provided to the furthest corners of the country. Second, it avoids the unnecessary travel of patients for treatment, a vital requirement to prevent Covid.

One of the key features of hospitals in India is that they provide world-class healthcare at a fraction of the cost, compared to other countries. So, patients from neighboring countries and also other places, come to get treated here. It is a win-win situation for both.

The Government is also doing its bid by granting infrastructure status to healthcare and providing universal health coverage. This will further drive investments in this sector. The share of FDI investments in healthcare has almost doubled since 2011, proving the interest of foreign players to enter this sector.

5. Infrastructure

Despite the economic challenges, the Indian government spent heavily on infrastructure in 2020 and will continue to do so in the coming years. It had launched the National Infrastructure Pipeline (NIP) in 2019, with a budget of 102 lakh crores of rupees to spend on infrastructure projects. According to wealth managers, this sector might receive a larger budget allocation in 2021. several projects like expressways, freight corridors, power plants, and railway lines are already underway.

Tunnel road construction projects like the Kailash Mansarovar route has created substantial employment for rural people. The infrastructure sector is responsible for the overall growth of the Indian economy. Due to the increased spending in this sector, other ancillary industries like cement and steel are also seeing spiking demands.

Investors can expect a good return on investments in infrastructure companies that have a good track record of completing projects on time.

The year 2021 is the year of hope after the pandemic ravaged businesses across the world in 2020.  

A Note for Every Entrepreneur

It is significant to maintain positive vibes among your employees, stakeholders, business associates, and customers. Re-visit your business strategies, HR policies, and deliverables to suit the need of the hour. Growth might be slow, but the good thing is that every sector is showing marks of recovery. Focus more on sustenance - for your employees and every individual associated with your business in some way or the other.

To put it in the words of Mukesh Ambani - "Do we really move the country forward? Does the consumer gain?" Let this be the revival mantra for your business.

Here's wishing more power and abundance to all entrepreneurs for the New Year and always!

Also read:

1) How small business promotes industrialisation?
2) Impact of Lockdown on Indian Economy
3) GST: Is this a benefit to the Economy?
4) How funding boosts Startups to redefine Indian Economy?