Basking under the Sun!
India to hit a hat-trick as fastest growing economy, unparalleled transformation in nine years, per capita incomes to be $ 5200 by 2032.
K.A.Badarinath
For second year in continuum, India is the fastest growing economy globally with impressive 9.1 per cent and 7.2 per cent clocked in 2021-22 and 2022-23 respectively. Even with projected 6.5 per cent GDP growth for this fiscal ending March 31, 2024, India will top the global sweepstakes and hit a hat-trick.
This means the moon for an economy that’s home to world’s largest population at 1.4 billion, an expanding aspirational class and the middle-income families that continue to move upward in the consumption and investment chain.
From investors’ point of view, both domestic and foreign players would make merry given the healthy uptick in demand for goods and services within the country. This is significant as Germany has slipped into recession, top economies in Europe are on a downslide and the US continues to struggle out of a whopping $ 31.4 trillion debt crisis. The tentative deal between democratic White House and Republicans do not mean much given that President Joe Biden is in a tight corner.
Prolonged war in Eastern Europe getting worse and Kiev’s drones hitting Moscow’s metropolis send out two firm signals. One, the shadow-boxing by big boys with Russia and Ukraine playing front foot continues to adversely impact geo-political and economic matrix. Secondly, there seems to be no abrupt end to this long drawn conflict notwithstanding peace overtures made by Indian Prime Minister Narendra Modi. Its impact is bound to be significantly felt as the global growth figures are expected to trim to 2.8 per cent in 2023 as against 3.4 per cent a year before.
In the melee, Indian stock markets being valued fifth largest globally at $ 3.3 trillion after US, China, Japan and Hong Kong is something that one can rejoice about. It only indicates the investment appetite of both foreign players and domestic retailers that yearn to dip into the famed India growth story that’s only getting meatier by the day. Also, the confidence that investors repose in our regulator, Securities Exchange Board of India to run the show with zero payment defaults apart from strong and stable central government that commands huge credibility politically and with economic stakeholders.
Three prime numbers that stand out are services, exports and agriculture sectors contribution to healthy GDP growth beating doomsayers’ diatribe on economic mismanagement. Secondly, front loading capital expenses and big private consumption has fuelled the Indian economy. Gross fixed capital formation at 11.4 per cent was highest in over a decade and its share in GDP accounting for 34 per cent. Private consumption rose by 7.5 per cent and its share was highest at 58.5 per cent.
Most important signal in the macro-economic numbers was the confidence within the economic managers of Modi government that inflation can be contained to four per cent going forward.
Unexpectedly healthy GDP numbers have special significance for Indian government led by Prime Minister Modi who has led from the front in last nine years.
This bears out in the American financial services Morgan Stanley’s report released on Wednesday on nine years ‘transformation’ heralded by team Modi. Reforms undertaken across sectors in last nine years including governance laid the foundation for enhancing the per capita income to $ 5200 by 2031-32 from $ 2200 reported in 2021. And, over 46 per cent households would earn anything between $ 10,000 – 35,000, nearly double the proportion in 2021.
Most important is that capital expenditure and fixed capital formation is expected to grow exponentially as percentage of GDP and share of Indian exports double to 4.5 per cent by 2031.
As pointed out by government’s economy managers, scams and corrupt deals that marked 2004-14 decade are a thing of the past. From lost decade to performing and transformative ten years is what even Morgan Stanley seems to have surmised in its detailed report.
Fourteen quarters of runaway inflation and 12 quarters of decline in economic growth and industrial production during 2004-14, pre-Modi era stands out as it culminated to virtual financial collapse that was triggered by the housing bubble burst in US that burnt the world with its contagion effect.
Change is order of the day and India has arrived leaving behind the dark days!
(author is Director & Chief Executive of Centre for Integrated & Holistic Studies, a Delhi based non-partisan think tank)