Published: Thursday. August 15, 2024, 12:21
India, the world’s fastest-growing primary economy, is celebrating its 78th Independence Day with a strengthened view of itself as a “Viksit Bharat” or evolved India until 2047, the centenary of the country’s independence.
This year marks a milestone for India as its GDP reaches the $4 trillion mark, bringing it closer to the $5 trillion target by 2027 and as the third largest economy, surpassing Japan and Germany.
As the world’s most populous nation, India is embarking on the next step of its spectacular expansion journey, driven by a combination of political reforms, technological advancements, and a young and dynamic workforce.
Economic power
In recent decades, India has had one of the most dynamic and resilient economies in the world. The country’s sustained economic growth, coupled with a colorful business ecosystem and a giant domestic market, has propelled it to the rank of the world’s fifth giant. economy, overtaking the United Kingdom in 2022.
India’s GDP grew by 8. 7% in the 2021-2022 fiscal year, making it one of the fastest-growing primary economies in the world. The World Bank forecasts that India’s GDP expansion will reach 6. 9% in the current fiscal year (2023-2024) and 6. 6% in 2024-25. While the Asian Development Bank (ADB) and Fitch Ratings have estimated India’s expansion at 7%, the International Monetary Fund (IMF), S
The Reserve Bank of India (RBI) has also expressed optimism about India’s economic trajectory, forecasting a GDP expansion rate of 7. 2 for the current fiscal year.
Strong expansion drive
The central bank’s research suggests that the Indian economy is well positioned for a physically powerful expansion drive in the coming years, driven by domestic demand and policy support.
A report by the Center for Economics and Business Research (CEBR) predicts that India will overtake the United States as the world’s second-largest economy by 2027.
The Economist Intelligence Unit (EIU) predicts that India is poised to consolidate its position as an economic powerhouse.
Sanjeev Sanyal, a member of the Indian Prime Minister’s Economic Advisory Council, predicts that India will reach the $4 trillion GDP mark this year, outpacing expansion rates.
“This year, India’s GDP will reach $4 trillion, putting us on par with Japan in terms of economic size. We remain the fastest developing economy in the world by a significant margin. %, and We expect an expansion of more than seven percent this year, surpassing that of all primary economies,” Sanyal said.
Macroeconomic indicators
After liberalization, it took us 16 to 17 years to reach the first trillion dollars. It took another seven years to reach the $2 trillion mark, which happened in 2014-2015. It took another seven years to reach the $3 trillion mark in 2021-2022. It has taken five years, but we lost two because of Covid-19. In just 3 years, we will exceed 4 trillion dollars. Now it will only take us two years to surpass $5 trillion, unless a major and invisible surprise occurs. »
Other macroeconomic signs are also flashing green. Inflation is falling, as is the budget deficit (although the public deficit of the Union and the Member States as a whole remains very high, above 8%). Tax revenues are dynamic and peak as a percentage of GDP, and external expenditure The existing account (commercial and invisible) has an easily manageable deficit, as it is more than offset by net capital inflows. The RBI’s foreign exchange reserves hit record highs, and the rupee remained solid against the US dollar. These figures tell us that we have achieved this elusive goal: expansion with stability.
Third economy until 2027
IMF figures for 2024 put India’s GDP at $3. 94 trillion (in nominal dollars), only slightly less than Japan’s at $4. 11 trillion. Germany is larger, with more than $4. 59 trillion. Given faster growth, it is moderate to expect India’s GDP to be higher. than that of those two countries in the coming years, becoming the third largest in the world, although several leagues behind the first two (United States and China).
Deloitte’s August update of the India Economic Outlook says that several projects in the 2024-25 Union Budget aimed at improving agricultural productivity, creating employment and production for young people would help demand from the source side, curb inflation and help customer spending, specifically in the productive sector. rural areas.
According to the report, optimism prevails, as India records an 8. 2 percent expansion in the 2023-24 monetary year, beating all expectations for the third consecutive year. Amid the expansion, new spending patterns are emerging in rural and urban India. There is a visual shift towards spending on discretionary durable goods (including cars and electrical and electronics), as well as services, as reflected in data released through the 2022-23 Household Consumer Expenditure Survey, the report adds.
Indicators flash green
With the highest primary economic signs flashing green, the World Bank’s latest progression report: “The Middle Income Trap” presents a bleak outlook, suggesting that, at the current rate, China would need more than 10 years, and Indonesia and India, between 70 and 75 years. years, respectively, to achieve a quarter of the United States’ per capita income. India faces significant cultural deficits that are not consistent with expansion despite a gigantic pool of skills and significant economic achievements, raising the question of whether India wishes to replace its strategy.
Some economists, such as former RBI governor Raghuram Rajan, suggest a new path to further expansion and development, at a time when a debate is already underway about whether India deserves to abandon its efforts to expand its production base and move fully towards creating a service industry. sectoral. 1] Oriented economy. As for the policy strategy advised by the World Bank, it does not seem radically different from the existing traditional strategies. The focus on investment and infusion envisages the adoption of foreign technologies and their diffusion into the economy.
Taking advantage of the sector
They warn that for India to avoid the hurdles normally faced by emerging economies and a $30 trillion economy until 2047, as envisioned by the government, the country “will have to relentlessly pursue immediate economic expansion based on liberal economic policies that exploit the personal sector. “With this in mind, many will continue to demonstrate against the source of income inequality in India. We will not have to be influenced or affected too much by such criticism. “
Since 1970, the average consistent with the source of income per capita of countries with an average source of income has never exceeded one-tenth that of the United States, according to the World Bank report.
For India, in line with the source of income per capita (measured using purchasing power parity, as it is a better comparator of living standards), $10,123 is only 43% of the global average of $23,444 (China’s is over $25,000). In nominal dollar terms, India’s source of income per capita is lower than that of an entire 50 largest economy (Bangladesh), and higher than that of Cambodia, which is not flattering. There is a long way to go, economists stress.
To achieve this long-standing goal of adapting the world’s third-largest economy by 2027, the government has put in place a multi-faceted strategy that encompasses the following key elements:
Accelerating growth
The government has set a target of making India a $5 trillion economy by 2025 and a $10 trillion economy by 2030. Ongoing policy reforms such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy, aim to make it less difficult to do business and economic efficiency. The government’s concentration on infrastructure development, adding the National Infrastructure Pipeline and the National Monetization Pipeline, is expected to boost investment and create jobs.
Strengthening the productive sector
The Make in India initiative was further strengthened with the advent of production-linked incentive (PLI) programmes, targeting sectors such as electronics, automobiles and pharmaceuticals. The progression of trade corridors and committed production zones is expected to attract domestic and foreign investments, thereby boosting the expansion of the productive sector. Efforts are being made to integrate India into global supply chains, leveraging its competitive benefits in spaces such as labor-intensive manufacturing and high-tech industries.
Promoting virtual transformation
The government’s ‘Digital India’ program has been a key driving force in the country’s virtual transformation, with projects such as creating physically powerful virtual infrastructure, e-governance and selling emerging technologies. The expansion of the Unified Payments Interface (UPI) and the adoption of other virtual payment solutions are expected to drive monetary inclusion and breathe life into the virtual economy. Investments in emerging technologies such as synthetic intelligence, blockchain and the Internet of Things target productivity, power and innovation across various sectors.
Developing human capital
The government has prioritized investments in education, skills progression and healthcare to build a healthy, professional workforce. Initiatives like the National Education Policy 2020 and the Ayushman Bharat program are expected to provide access to quality education and healthcare, respectively. Efforts are being made to upskill and retrain the workforce to meet the changing demands of the hard labor market, especially in the context of technological advancements.
Promoting sustainable development
India has made significant progress in its commitment to sustainable development, with renewable energy, climate change mitigation and environmental conservation. The country has set ambitious targets for renewable energy generation, aiming to reach 500 GW of installed capacity by 2030. Initiatives such as while Swachh Bharat Abhiyan (Clean India Mission) and the National Clean Air Program are addressing urgent environmental challenges.
Geopolitical and geoeconomic influence
India actively participates in regional and global economic and political forums, such as the G20, the Shanghai Cooperation Organization and the BRICS group. The country’s policies of “Act in the East” and “Neighbourhood First” have links with its regional partners, thus expanding its geopolitical and geo-economic influence. India’s growing economic and technological capacity, combined with its strategic location, position it as a key player in the emerging multipolar global order.
As India celebrates its 78th Independence Day, the country is at a crucial juncture in its history, poised to become an evolved India by 2047. Remarkable economic growth, thriving business ecosystem, virtual transformation and The country’s strategic projects have made it a must-visit country. A global economic power.
Aiming to become the third-largest economy by 2027, India is charting a course for a long-term of prosperity, technological innovation, and sustainable development. The road ahead may present challenges, but the resilience and determination of the world’s most populous population will propel him to know his ambitious vision of an evolved India.
“issacjohn@khaleejtimes. com
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