India's Bright Spot

Sebastien Callebaut -

Growth is Set To Continue

India's economic growth is shining brightly as its outsourcing sector thrives and an increasing number of tech companies move their manufacturing operations to the country, according to Michael Yoshikami, CEO of Destination Wealth Management. He sees the country growing at a rate of 5% to 6% a year over the next five years, while the International Monetary Fund projects an 5.9% expansion for 2023.

  • Yoshikami attributes a significant part of this growth to the momentum of India's outsourcing sector.
  • Many companies are turning to India for software development projects due to the combination of high quality and reasonable costs, as noted by Krina Mehta, co-founder of Fortune Infosys, a US-based offshore software development company.

Overtaking China

India's outsourcing phenomenon is expected to continue, driven by the presence of technology schools and a focus on cost control among companies. Moreover, India's labor costs remain considerably lower than those of many other countries, especially in comparison to China's rising wages.

  • Yoshikami observes that China, once a cheap outsourcing destination, no longer holds that advantage. He anticipates a shift of outsourcing away from China, as well as from other countries like the Philippines and Vietnam, toward India.
  • India has now taken the lead as the world's most populous nation, with a staggering population of over 1.4 billion people.

Time Bomb

However, this demographic advantage, with nearly 53% of the population under 30, is turning into a burden for the economy as millions of young individuals grapple with unemployment.

  • According to Radhicka Kapoor, a fellow at the economic research agency ICRIER, unemployment is just the tip of the iceberg. Beneath the surface lies a severe crisis of underemployment and disguised unemployment, posing a hidden threat to the nation's stability.
  • The danger for India lies in a vicious cycle that hampers economic growth. Declining employment opportunities and earnings erode India's capacity to generate the necessary economic expansion for job creation among its burgeoning young population.

Economist Jayati Ghosh describes India's demographic dividend as a "ticking time-bomb." She emphasizes the alarming reality of numerous educated individuals who have invested significant personal or familial resources into their education but are unable to secure the jobs they need.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.

Credits

Photo by Abhay Singh / Unsplash.