Former SBI Executive Anil Chaturvedi on the Current State of the Indian Economy

Anil Chaturvedi
10 min readOct 19, 2020


As is the case with many of the world’s largest economies and the coronavirus, India’s story is familiar. Stringent lockdowns of varying effectiveness, sharp economic contractions, disrupted supply chains, massive spikes in unemployment, catastrophic losses in the travel and hospitality industries, a small business sector that’s struggling to survive. And like elsewhere, the novel coronavirus continues to threaten the prospect of a sustained economic recovery.

Yet, in each of these events, India’s economic contraction was as harsh, or harsher, as any other country in the world. Part of the drastic nature of India’s economic fallout is due to India’s flagging economic performance before the pandemic. Even before lockdowns became commonplace, India’s growth, as measured in terms of GDP, had nearly halved from the year before.

Add to that the fact that India is one of the nations that has been hit hardest by the coronavirus. India has reported more than 5.6 million cases, only trailing the United States’ 6.9 million. And the impact on India’s GDP during April was one of the largest negative declines in the world.

But to get a clear picture of India’s struggles requires going deeper than this surface-level narrative. Fortunately, India is host to many talented economic minds, and we can lean on one of them, Anil Chaturvedi, an experienced banker with decades of international experience, to elucidate the situation in India.

Anil Chaturvedi

Before diving into the complicated, dynamic issues that India’s economy faces, it’s best to frame these problems through the lens of financial experts like Anil Chaturvedi. Chaturvedi is currently Managing Director for Hinduja Bank in Switzerland. Before holding this position, Chaturvedi worked at the State Bank of India and its subsidiaries, A.N.Z. Grindlays Bank, and at Merrill Lynch.

In his role at Merrill Lynch, Chaturvedi was specifically focused on providing banking services to non-resident Indians located in the United States, Europe, and Asia. And at the Hinduja Bank, he helps facilitate strategic alliances between corporations in India, Europe, USA, and Asia. This includes overseeing mergers and acquisitions, sale and restructuring of distressed assets, and capital raising from international organizations, among other duties.

All this to say, Chaturvedi possesses a broad, yet deeply technical understanding of the Indian economy’s place in the global market. Not to mention, with four decades of experience, he has witnessed the transformation of the Indian economy from a mostly closed off pre-1990 economy to a major global economic power.

The Structure of the Indian Economy

As Anil Chaturvedi explains, “To be successful in finance and investments, one has to always study the global macro picture, which determines micro opportunities. One has to be a student of economics to be able to understand these trends which shape industries and companies.”

In this way, it’s important to understand the broader structure of the Indian economy in order to make sense of what the coronavirus has wrought. And as Chaturvedi points out, the macro picture determines micro opportunities. As such, finding a way forward in India will require investors and policymakers to take a step back.

At a high-level, the large majority of gross domestic product-the total value of goods produced and services provided in a country during one year-is created by India’s services industry. Within the services industry, Information Technology (IT) is the largest value creator. Second and third, in terms of their contribution to India’s GDP, are industry and agriculture, respectively.

However, the vast majority of India’s workforce is employed in agriculture, owing to the fact that agricultural work requires a larger labor force than the services industry. Still, this doesn’t mean that manufacturing and services aren’t important; far from it. The manufacturing and services sectors provide the greatest opportunity for India’s continued future growth. With that in mind, we’ll take a look at the state of India’s main economic sectors.

Agriculture in India

While the picture is far from rosy for India’s agricultural sector, it did manage to grow by 3.4 percent from April to June during Covid-19. This stands in stark contrast to India’s overall GDP, which cratered by 23.9 percent over the same time period. However, before the outbreak, Indian farmers had been struggling due to low crop prices and higher costs and that hasn’t ended.

As the largest employer (by far) in the Indian economy, the resilience of the agricultural sector is something to watch closely.

Industry in India

The industrial sector is comprised of the manufacturing, mining and quarrying, and energy industries. Manufacturing is the largest industry within the industrial sector and was particularly hard hit by the pandemic. Hovering just below 140 in January 2020, India’s Industrial Production Index fell to 54 in April. That said, manufacturing has bounced back, with the Index rising to 89.5 in May 2020, reaching 108.9 in June, and standing at 118.1 as of July 2020. And, though the future is still murky, it’s worth noting that Indian officials are hopeful (and hard at work) to begin attracting foreign investment into India’s manufacturing industry.

On the whole, Anil Chaturvedi’s advice to executives to “Be prepared, be cautious,” holds true in the manufacturing industry. Certainly, there could be opportunities, if the global economy stabilizes to the extent that multinationals might be more willing to make the capital commitments required to move their supply chains to India.

Services in India

As the services sector in India, so goes the economy of India. The service sector, though it employs fewer workers than the Industry and Agriculture sectors, contributes more value to the Indian economy. This is significant for the whole of India because the value that comes from the services sector benefits industrial and agricultural workers because it generates much of the Indian government’s tax revenue.

Not only that, by providing high skill jobs to the people of India, the services sector helps train the population for what is increasingly becoming a global economy dominated by knowledge workers.

Unfortunately, the pandemic hit the services sector particularly hard. With the lone bright spots of e-commerce and online education, the service economy-according to the purchasing managers’ index (PMI)-is in a contraction. When the index is above 50, it indicates an expansion, but less than 50 signals a contraction.

Unsurprisingly, many companies have scaled back their operations and shed jobs. In addition to that, investment in innovation, as measured by startup funding fell drastically as a result of the coronavirus. In fact, from February to March, startup funding fell by 50 percent. More broadly, startup funding decreased by 22% year-on-year for the first quarter of 2020.

Zooming Out to Face the Crisis

So far we’ve followed the advice of Chaturvedi to study the global macro picture. With this global macro picture, you can start to explore opportunities. Clearly, the focus must be on the current crisis, so that we may save as many lives as possible. But it’d be foolish to blind ourselves to the opportunities of the future while we struggle against this virus. After all, a more prosperous nation can benefit the citizens of a nation, so long as its government is functional.

Micro Opportunities in Indian Manufacturing

Though the outlook is still very uncertain, you can’t ignore the opportunity present in the manufacturing industry of India. Governments have built up land banks and earmarked them for manufacturing facilities. Add to that the recent backlash against China by many Western nations, and India could become an even more desirable destination for the operations of multinational manufacturing corporations. Not only would this provide high-paying, stable jobs to more Indian citizens but it would help India move further up the value chain in the global economy.

As former governor of the Reserve Bank of India and economist Dr. Duvvuri Subbarao noted, India’s infrastructure is still intact. Transport systems and factories are still operational; in other words, the structure of India’s economic engine is strong. Furthermore, India’s demographics are highly favorable, because the work-age population (people between 15 and 64) is larger than the dependent population (children less than 14 and adults over 65). This is important because it means a larger portion of the population will be working and generating value for the economy than will be retired or incapable of working and generating value.

To see a parallel, you can look at Japan’s economic development. When their population shifted so there were more working-age people than non-working age people their growth followed. As Atul Thakur explains:

Japan was among the first major economies to experience rapid growth because of changing population structure. The country’s demographic-dividend phase lasted from 1964 to 2004. An analysis of the first 10 years since this phase shows how such a shift in the population structure can propel growth. In five of these years, Japan grew in double digits; the growth rate was above 8% in two years, and a little less than 6% in one. Growth slid below 5% in only two of these 10 years.

While the growth potential promised by these favorable demographics won’t be confined solely to the manufacturing industry, they’ll certainly serve as a tailwind for this sector. And combined with India’s more attractive position as a manufacturing destination, it’s a reason to be optimistic.

Macro Opportunities for the Indian Economy

To be clear, India’s number one focus, and quickest way out of the crisis caused by the coronavirus, is to deal with what’s in front of the country. Right now, that means reckoning with record unemployment numbers, food insecurity, an exodus of migrant workers, and the hundreds of thousands of Indians currently infected with the coronavirus.

The fact remains, however, that the conditions for a long-term Indian innovation drive are ripe. Despite the crash in startup funding for Indian entrepreneurs as a result of the coronavirus, India possesses a growing class of skilled engineers and entrepreneurs. Not only that, in its role as a major global manufacturer of pharmaceuticals, India is well-positioned to deliver innovation further up the value chain. Since a government push in 1970, India’s generic drug manufacturing industry has developed into an international powerhouse. As a result, the cost of producing drugs in India is low compared to elsewhere. This means, as Chandrakant Lahariya, a vaccinologist and public health expert explains, “A [coronavirus] vaccine developed in India would be far cheaper than a vaccine developed anywhere else.”

Not only would this help unlock the Indian economy but it could also transform India’s pharmaceutical industry, shifting India from primarily a manufacturer to both a manufacturer and an innovator. This is important because, for India to continue growing, it will need to continue its shift from an agricultural-based economy to an economy focused on industry and services.

And this innovation wouldn’t necessarily be constrained to just the pharmaceutical industry. In many ways, the coronavirus has sparked a wave of innovation, as Sreevas Sahasranamam, a lecturer for the University of Strathclyde explains. This wave of innovation has seen an effective integration of universities, start-ups, and the government, which will be key to future, sustained innovation.

An Uncertain Near to Medium-term Future

Anil Chaturvedi is not a fan of pessimistic thought. He believes that every catastrophe provides an opportunity and one must be prepared to strike at the right time. This time-tested wisdom holds true during the current crisis. However, that’s not to say India doesn’t face a challenge of catastrophic proportions.

The fact is, the numbers are startling. As an FICCI survey conducted in March found, up to 53 percent of businesses in India reported some level of impact as a result of shutdowns caused by COVID-19. Moreover, by April 24, 2020, India’s unemployment rate had increased to 27.11% for the week ended May 3rd. Transport companies, such as Ola, have had to lay off huge numbers of staff due to massive drops in revenue. In Ola’s case, revenue dropped by 95 percent, according to a report in May, after the Coronavirus pandemic hit.

Of course, the list of relief efforts in India is long, and it will take time before their effectiveness can be determined. From partnerships between universities, government, and business to develop technologies and techniques to mitigate the spread and severity of the virus to billions of dollars in relief funds, the efforts have been massive and comprehensive. Yet there’s simply no way of knowing if they will be comprehensive or massive enough to clear the way for an Indian recovery.

Moreover, respected economists’ views on what the recovery might look like have varied. Former governor of the Reserve Bank of India and economist, Dr. Duvvuri Subbarao believes a V-shaped economic recovery is ahead. He explains, “Most recessions have seen a V-shaped recovery except the global financial crisis of 2008. Why do I say a V-shaped recovery is possible out of this for India? I say this because this is not a natural disaster.” He goes on, “Our infrastructure is intact and so is our transport system. Our factories are intact too. So, with the right policies, many firms can revive and engineer a V-shaped recovery.”

But, as Mythili Bhusnurmath, Editor of the Economic Times, illustrates, there are at least four, high-level scenarios that could happen. Each of these scenarios depends on, in large part, the success of lockdown measures, the easing of restrictions, and the world’s ability to develop and distribute an effective vaccine.

Leaning on Principles in the Face of Uncertainty

Principles are fundamental truths that serve as the foundation for a system of belief or chain of reasoning. Anil Chaturvedi, through his lengthy career in finance and economics, has always leaned on his solid principles. Among those principles is the idea of thinking creatively, staying disciplined, maintaining focus, avoiding pessimistic thinking, and exercising caution.

Whichever direction the virus or India’s economy goes, these principles will hold true. To stop the virus while resuscitating an economy in tatters will require a potent mix of creativity, discipline, focus, and optimism. India faces a challenge, the likes of which the country-and the world-has rarely seen. But the same principles that brought greater prosperity to the country of India over the past several decades can bring that prosperity back. Working together, India’s government officials, entrepreneurs, and its working-class can bridge the gap created by the devastation of the coronavirus.

And as dark as these days may seem, the fact is that there is perhaps no better opportunity for India to make transformative changes to its economic structure that will benefit the country in the long-term. These transformative changes might take the form of renewed drives for innovation, to lower the cost of production while increasing its output and to position India as a leading global innovator. Of course, with transformation comes a shifting economic base, and we can’t afford to leave large swathes of India’s rural population behind.

Along with exciting, new innovative ventures India will need to ensure its workforce is prepared for potentially massive shifts ahead. In time, as most other developing countries do, India will shift its focus away from agriculture and into manufacturing and services. In many ways, it already is doing so. But agricultural workers must be prepared for these changes, otherwise, they’ll have been pursued for the betterment of a small proportion of the population.

Originally published at on October 19, 2020.



Anil Chaturvedi

Seasoned banker with over four decades of experience. Managing Director for Hinduja Bank in Switzerland.