India's G20 presidency: Here's what it means for key sectors of the country's economy

India has always been described as a land of paradoxes. Be it India’s culture, diversity, or sheer population size, it is complicated and fascinating. For about two decades now, the engines of the nation’s economic growth have been firing impressively. Companies have become larger and many have left a rather large global imprint.

So, India’s presidency of the G20 forum that represents 85 per cent of global GDP and 75 per cent of international trade is hugely important as it comes at an inflection point, when a confident India Inc. is looking to flex its muscles globally after it breezed past the years of the pandemic and emerged relatively unscathed.

Nadir B. Godrej, Chairman & Managing Director of Godrej Industries, has seen the transition of India Inc. from close quarters. “Earlier, we had limited influence on the world stage but that has changed. Businesses are a lot more confident,” he says. In many ways, the beginning of this new story was the opening of the economy in the early 1990s. “Yes, it was hugely exciting but one was also scared. Our group worked with large global names through joint ventures and in the process, best practices were picked up.”

GROWING INFLUENCE

That growing confidence is a reflection of the Indian economy’s increasing clout. In just a decade, India has zoomed from being the tenth-largest economy to the fifth now. But that has not translated into commensurate influence on global policies. “India’s G20 presidency is well-timed for it to exercise greater influence on the agenda and narrative on global policies across economic, social, environmental, and digital sectors. This is when we are the fastest-growing large economy in a polarising world with elevated debt, decelerating growth, and rising uncertainty,” says Ajit Pai, Partner (Government and Public Sector) at EY India.

The close coordination that the G20 platform has facilitated over the past year has had many benefits, he says. “More than 18 ministerial meetings, 80 at the working group level, and 33 engagement group meetings apart from numerous side events [have been held]. These interactions have not only given Indian officials and businesses insights into various aspects of global finance and development, but also access to the who’s who of global decision-making,” says Pai.

Besides, there is a separate track for business leaders, the B20 engagement group. Its summit will be held in New Delhi at the end of August, and will see the participation of the captains of Indian and global industry: from N Chandrasekaran, chairman of Tata Sons and the B20 India Chair; to Shantanu Narayen, Chair and CEO of Adobe; Arvind Krishna, Chairman and CEO of IBM; and, Sunil Bharti Mittal, Chairman of Bharti Enterprises.

All this is expected to translate into trade and investment opportunities for Indian businesses that will also help with global expansion. Besides, it could also give domestic industry a prominent seat at the table not just in inter-national trade, but also in discussions on policy matters like trade agreements. It may also give Indian firms a bigger say in issues like climate change.

STEPPING STONE

Godrej calls this “merely a stepping stone” for bigger benefits that will follow. “[The] China+1 [strategy] is only one part to it. As a country, a lot of work has been done on developmental R&D (research and development) and we will now need to focus our attention on the fundamental part,” he says. To his mind, the digital stack has been a big breakthrough for India and one that can be taken to the rest of the world. “The G20 comes when India is at an interesting stage of development and better off than most countries, including China,” says Godrej.

For a long time, China has had a huge advantage in manufacturing at scale backed largely by low labour costs. “If labour-intensive manufacturing worked for them, we can make a mark in knowledge-intensive manufacturing.” In an industry like chemicals, some manufacturing has moved to the US. “If we can build on that, what we don’t have by way of labour can be made up through our prowess in technology. This is also where PLIs will make a difference,” says Godrej.

A lot of progress has already been made. Pai highlights how India has forged a consensus on developing an international reference for classifying occupations to promote cross-country comparability under the G20 Employment Working Group. “The G20 members have also pledged to provide adequate social protection for all workers, including gig and platform workers, which will help such workers tide over stresses across the life cycle. In India alone, 7.7 million gig and platform workers are set to benefit from this,” he says. The Indian presidency has launched the Startup20 engagement group to help boost that segment.

In the near- to long term, there will be an impact, profound in all likelihood, on various sectors. As this big moment draws closer, we take a look at how different sectors of Indian industry are gauging the G20 platform’s impact.

Oil and Gas: A Leap of Faith

By: Krishna Gopalan

Think oil and gas, and think green. If that is hard to grasp, it’s what large companies in the sector are working towards. Take Reliance Industries Ltd (RIL), for instance. The oil-to-telecom-to-retail behemoth mentions the word green as many as 133 times in its 2023 annual report. In fact, the company makes it clear that it “is committed to maximise integration and produce high-value chemicals and green materials for the growing Indian market”.

The company has already announced a massive $10-billion investment in new energy. “A switch to cleaner energy sources is key to our decarbonisation strategy and we are making significant strides in establishing a world-class solar energy value chain. We are also progressing on building a green hydrogen ecosystem with a goal to provide affordable green hydrogen as a viable alternative to traditional fuels,” Mukesh Ambani, RIL’s Chairman and Managing Director, is quoted as saying in the report.

This transition has been an important theme in discussions at the G20 summit, with the energy transition track laying emphasis on the switch away from fossil fuels. So, it is expected that the forum will give India’s green story a big fillip. “It allows larger countries with technology and capital to work with emerging markets like India. That means the transition to areas such as clean energy, with a helping hand, will take place in time,” says Jigar Shah, Head of Sustainability Research at Maybank Investment Banking Group. “We have taken important steps on renewable energy with respect to efficiency or electric mobility. However, execution is critical.”

This is a long journey calling for a big mindset change. “We will never get decarbonised unless carbon capture and storage become a reality. The potential is always there and [we] just need to move a lot faster to have a robust end-to-end mechanism to address fossil fuel,” says Shah.

Utilities: Powering India

By: Manish Pant

As the world’s third-largest energy consumer, India aims to have 500 gigawatts (GW) of non-fossil fuel-based capacity by 2030. “G20 energy meetings foster discussions on global energy challenges and opportunities. Emphasising transnational green grids, we envision revolutionary changes in energy systems, successful achievement of climate goals, and millions of green jobs,” says Praveer Sinha, CEO & MD of integrated power company Tata Power.

India has taken the lead by co-founding the International Solar Alliance with France. “Together with the G20 community, we pave the way towards a sustainable, resilient and affordable energy sector supported by green finance, green technology, and a robust supply chain,” says Sinha.

In January, India launched the National Green Hydrogen Mission. “India leads by example, scaling up installed renewable energy capacity to 173 GW and championing initiatives like the hydrogen mission, rapid deployment of solar parks, and the implementation of the PLI scheme,” says Vineet Mittal, Chairperson of Avaada Group, a green energy developer.

The G20 presidency will also help India attract global investments in the space. “While the country was unable to find a suitable financing pact under the Just Energy Transition Partnership in the past, its G20 presidency provides it an opportunity to find a better deal,” says Rajashree Murkute, Senior Director at CareEdge Ratings.

Automobiles: Focus on Roadmap

By: Prerna Lidhoo

At the ongoing G20 meetings during India’s presidency, the country has pitched itself as a hub for the manufacture of fast electric chargers, electric vehicle (EV) batteries and battery recycling. To emphasise its commitment, the Indian government has set aggressive targets of EV sales penetration of 40 per cent for buses, 30 per cent for private cars, 70 per cent for commercial vehicles and 80 per cent for two-wheelers by 2030.

Industry players say that while the targets are clear, the road map is unclear. “One has to very closely watch for that road map because we cannot afford to derail the process as far as EV adoption is concerned,” says Sohinder Gill, Director General of the industry body Society of Manufacturers of Electric Vehicles (SMEV). The country has huge potential in the global EV manufacturing ecosystem, but the real question is whether execution will match this potential. By 2030, India would require 500 gigawatt hours of EV batteries.

Gill says the G20 summit is all about reconfirming India’s determination. “But after the G20, we have to make sure that those commitments are met. Our goal is very clear but the road map is chequered. It has to be a complete consortium of industry players; it cannot just be left to [policymakers],” he says. He warns that India is falling short on some targets. “The NITI Aayog had set a target of 100 per cent electrification in two- and three-wheelers by 2030. But today we’re at less than 5 per cent,” he says.

According to Jeetender Sharma, Founder & MD of Okinawa Autotech, driving positive change and empowering the future is the end goal. “As the G20 shapes global policies, we see tremendous opportunities for the growth of the auto sector, allowing our country to demonstrate its strength to the world. With the Indian automobile industry growing exponentially, we are confident of the positive changes that will lead to a new path for the entire industry,” he says.

Metals: The Heavy Metal Thunder

By: Ashish Rukhaiyar

The metals sector feels that India can push the de-carbonisation and green steel agenda as the G20 President. “India can set aspirational goals with a focus on processes wherein policy intervention and R&D is required,” says Vipul Prasad, Founder and CEO of Magadh Capital Advisors. “There is a lot happening in the sector in terms of hydrogen-based output as a part of the industry’s attempts to lower its carbon footprint. The focus will be on green steel and one could see clear long-term goals.”

India’s stance and that of Indian steel producers plays an important role as they are big globally. “We are cognisant of our responsibility as the world transitions to a low-carbon future. Our decarbonisation road map enables us to track our progress against well-defined targets for 2030,” says Prabodha Acharya, Group Chief Sustainability Officer of JSW Group. “The aim is to phase out thermal coal in steel making”. Interestingly, some analysts say it is too early to say if the presidency will bring any direct benefits for the sector. “Each country will put its best foot forward. Yes, the Indian government is trying its best but there will not be much change in the broad direction,” says an analyst.

Cement: Cementing The Future

By: Krishna Gopalan

India’s infrastructure story is reflected in the growth of several sectors. One of them is cement, demand for which cuts across sectors. With a total capacity of around 545 million tonnes per annum, cement is ready for the next phase. And the industry is hopeful that India’s G20 presidency will open up those opportunities. “We can attract foreign investment and collaborate on knowledge transfer,” says Mahendra Singhi, MD and CEO of Dalmia Cement Bharat. The long-term expectation is that reduced trade barriers can expand the market and help with climate change and sustainability. “The G20 economies are responsible for nearly 75 per cent of global emissions and their policy supports both sustainable practices and growth. Therefore, India can lead the transition... which can position [us] for long-term success,” he explains.

Industry trackers too are sanguine. Deven Choksey, Promoter and MD of wealth management firm KRChoksey Group, says that cement can easily capitalise on the local market. “The demand [is] here because of infrastructure. That will sustain and, over time, we will only become more formidable as a cement producer,” he says.

Aviation: Take-off Time

By Manish Pant

In an industry that is still struggling elsewhere, India’s aviation sector has emerged as the brightest spot. Domestic carriers ferried 88.19 million passengers in the January-July period against 66.95 million in 2022, per data from the Directorate General of Civil Aviation. This amounts to an impressive annual growth of 31.72 per cent and monthly growth of 24.67 per cent. And this was amply on display in June at the Paris Air Show. Of the total orders for narrow- and wide-body aircraft finalised there, the majority were by Indian carriers IndiGo (500), Air India (470) and Akasa Air (4).

“You look at the population we have, the economic growth, the geography, the diaspora; and the opportunity to support a much larger fleet is absolutely obvious,” Campbell Wilson, CEO of Air India, tells Business Today. With India expected to become the world’s third-largest economy by 2027, the aviation sector would benefit immensely. Vinay Malhotra, Head of Global Sales at India’s largest carrier IndiGo, calls it an ‘immense’ yet ‘untapped potential’. “Currently, the percentage of Indian consumers flying, both domestically and internationally, remains relatively low, signifying ample room for market development. The G20 presidency provides a crucial opportunity to leverage this potential, further accelerating the growth of the aviation sector in India.”

With over 400,000 flyers, 3,000-plus flights and digital interfaces from identification to expedited security, visitors can’t miss the transformation underway, says Satyendra Pandey, Managing Partner at aviation advisory AT-TV. The government is also working on developing Delhi as a global aviation hub. “The G20 often addresses financial regulations and international trade policies—that can indirectly affect [the aviation sector] by influencing factors such as foreign investment and market access,” says Videh Kumar Jaipuriar, CEO of Delhi International Airport Ltd. 

Real Estate: Building Boom

By: Arnab Dutta

The real estate sector is betting big on India’s G20 presidency for two reasons: one, it feels that visiting foreign investors and non-resident Indians’ (NRI) interest will be piqued; two, it expects the uptrend in economic activity to benefit. Nayan Raheja, Director of realty major Raheja Developers, says the forum has enhanced the visibility of cities where meetings are being held. “As it highlights India’s potential, the summit will propel foreign and NRI investment.”

The spillover impact for cities is the development they are seeing, says Manoj Gaur, Chairman & MD of Gaurs Group, and Chairman of industry body CREDAI. “This has showcased the country’s economic development and its vast investment potential.” Moreover, the vision document prepared by U20, or Urban 20, around sustainable development and green buildings is also significant. Dhruv Agarwala, Group CEO of Housing.com, PropTiger.com and Makaan. com, says as demand rises, the sector must gear up to meet the evolving needs of environmentally-conscious consumers. Developers who embrace future-ready buildings will unlock sustained growth. “The U20’s commitment to sustainable development... opens up new horizons of opportunity.”

Space: Across The Universe

By: Manish Pant

Look at the numbers. India currently has over 400 private space companies, including 150 start-ups. A space market that’s worth $8 billion and is growing at a CAGR of 4 per cent, compared to 2 per cent globally.

The promise of the country’s spacetech sector can be gauged from the fact that among the highlights of Prime Minister Narendra Modi’s state visit to the US in July was India becoming the 27th signatory to the Artemis Accords, an international commitment led by the US to return humans to the moon by 2025. “This collaboration will enable transformative advancements in these fields, opening new possibilities for economic growth and societal progress,” Atul Keshap, former Chargé d’affaires of the US Embassy in India and President of the US-India Business Council (USIBC), told BT in a statement.

Achievements of the fledgeling sector since 2020 have left many in awe. In a G20 Space Economy Leaders Meeting held in Bengaluru in July, several non-spacefaring countries realised for the first time the substantial ground covered by India. “We’re in a positive spiral. We are seeing that investor interest both within and outside India for investing in the Indian space start-ups has gone up dramatically,” says Pawan Goenka, Chairperson of Indian National Space Promotion and Authorisation Centre, the single window nodal agency for authorising, promoting and regulating private players in the space sector.

International experts feel the clearance of the Indian Space Policy that allows private entities to carry out end-to-end activities will be a game-changer. “The policy will really allow Indian start-ups to attract more foreign investment, which traditionally has been a challenge,” avers Elizebeth Varghese, People in Space-Leader at Deloitte. —