The Indian Economy â€" An Overview: India is one of the fastest growing major economies in the world, the acceleration of investment friendly policies, structural reforms and low commodity prices has provided a strong impetus for growth.

The central government, despite some criticisms, has introduced several programmes over the past year, including ones to augment the ease of doing business, encourage digitalisation, reduce skill insufficiencies, foster entrepreneurship and boost urban development. These deregulation measures, both current as well as foreseeable, have boosted Foreign Direct Investments (FDI), which registered a growth of 8.0% in 2016/17¹ over the preceding year.

FIGURE 1: SURVEY PARTICIPATION (1995/96 â€" 2016/17)

According to the Economic Survey of India 2016/17, the buoyancy in the country's GDP remains unchanged in recent years, with 2015/16 ending at a 7.6% growth and 2016/17 witnessing a GDP growth of 7.1%. In particular, the country's services sector grew at 7.7% last year, with the trade, hotels, transport and storage subsector registering a 7.8% growth estimate.

Figure 2 displays the GDP Growth, Inflation, and Exchange Rate for the period from 2012/13 to 2016/17.

FIGURE 2: GDP GROWTH, INFLATION AND EXCHANGE RATE â€" A FIVE-YEAR TREND

In 2016/17, the average exchange rate of the Indian rupee vis-à-vis the US dollar was `67.09:1US$, displaying a depreciation from the previous year. However, the rupee appreciated in the last quarter of the fiscal year on account of broad-based weakening of the US dollar after the result of the US presidential elections was greeted with skepticism by foreignexchange markets.

On the domestic front, inflows by Foreign Institutional Investors (FII), and a narrower Current Account Deficit (CAD) in the first half of 2016/17, gave room for the rupee to move up further.  At the time of going to print, the average exchange rate was `64.02:1US$.

The Prime Minister announced the 'demonetisation' of 500 and 1,000-rupee notes on 8 November 2016, with the intention of curbing corruption, counterfeiting, the accumulation of black money, and the use of higher denomination notes for illegal and terrorist activities â€" an important development for the entire economy. 

While the move caused a short-term cash crunch, its larger political and economic impacts (both positive and negative) will only be seen in due time. 

Furthermore, other institutional reforms that are in various stages of execution, such as the Goods and Services Tax (GST), the four Labour codes, the Arbitration and Conciliation Act, and Insolvency and Bankruptcy Act 2016, are likely to be significant contributors to the country's economic growth, going forward.

Notably, the much-awaited GST was rolled out on 1 July 2017, under which the Indian hospitality industry stands to benefit from homogeneous and uniform taxes, in addition to easy utilisation of Input Tax Credit (ITC).

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About Achin Khanna
Achin Khanna Achin Khanna is the Managing Director of Consulting and Valuation at HVS South Asia. He is a Member of the Royal Institution of Chartered Surveyors (MRICS). Over the past nine years at HVS, Achin has directed a large number of assignments, performed economic feasibility analyses and large scale portfolio valuations, successfully conducted operator searches and management contract negotiations. He has extensive experience in conducting hotel valuations, both in India and internationally. Prior to joining HVS, Achin spent ten years in the United States working across various roles in hotel operations, revenue management, franchise relations and business development. Achin holds a Bachelor of Science in Hospitality Management from Widener University, Chester, PA, and a MBA from the University of Phoenix, Arizona, USA. Contact Achin at akhanna@hvs.com 

About Sanaya Jijina
Sanaya Jijina Sanaya Jijina joined HVS in 2015 as an Analyst in the Consulting & Valuation division. She holds a Bachelor of Arts (Hons.) in Hospitality Management from the Institute of Hotel Management, Aurangabad (University of Huddersfield, UK). Prior to joining HVS, she gained hotel operations and Sales and Marketing experience by working with Starwood Hotels. Contact Achin at sjijina@hvs.com

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