Thursday, 10 Oct, 2024
By: Yash Gupte
According to Morgan Stanley, India’s GDP could more than double from $3.5 trillion today to surpass $7.5 trillion by 2031. Image Source: IANS
According to economists, India’s economy is expected to grow at a rate of 6.5-7.0 percent per annum.
India will become the third largest economy in the world by the year 2027, said Prime Minister Narendra Modi from the ramparts of the Red Fort on the occasion of India’s 77th Independence Day. Recently, New Delhi surpassed United Kingdom to become the fifth largest economy in September last year. According to economists, India’s economy is expected to grow at a rate of 6.5-7.0 percent per annum. DK Srivastava, Chief Policy Advisor at EY said, “India is very much on target to becoming the third largest economy based on the IMF’s projections as well as domestic estimates. Our real rate of investment is about 33 percent, the current account deficit is lowering and our demographic dividend is coming into play.” According to both domestic estimates and the IMF's estimations, India is on track to overtake Japan and Germany to become the third-largest economy.
The Indian economy expanded by 7.2 percent in 2022–2023; this year, growth is anticipated to be slower at 6–6.5 percent. Many agencies are likely to review their GDP growth forecast for the fiscal after the first quarter GDP data is released on August 31.
According to the IMF’s World Economic Outlook, global growth will bottom out at 2.8 percent this year before rising modestly to 3.0 percent in 2024. Global inflation will decrease, although more slowly than initially anticipated, from 8.7 percent in 2022 to 7.0 percent this year and 4.9 percent in 2024. Notably, emerging market and developing economies are already powering ahead in many cases, with growth rates jumping from 2.8 percent in 2022 to 4.5 percent this year. The slowdown is concentrated in advanced economies, especially the euro area and the United Kingdom, where growth is expected to fall to 0.7 percent and –0.4 percent, respectively, this year before rebounding to 1.8 and 2.0 percent in 2024.
As per the World Economic Outlook, the advanced economies are expected to grow at a rate of 1.1 percent in 2023 and 1.6 percent in 2024. Talking about the emerging markets and developing economies, they are estimated to grow at a rate of 4.5 percent in 2023 and 4.4 percent in 2024.
Source: International Monetary Fund
In case of the advanced economies, the United States is expected to grow at a fastest rate of 1.6 percent in 2023. US is followed by Canada as the country is expected to grow at a rate of 1.5 percent. Among the advanced countries, the United Kingdom comes in the list of the countries which are expected to register a negative growth. The IMF revised its previous forecast for India's economic growth rate for the next fiscal year downward by 0.5 percentage points to 6.3 percent. The IMF kept a positive perspective on India and justified the downward revision as an adjustment for historically better-than-expected figures.
According to Morgan Stanley, India’s GDP could more than double from $3.5 trillion today to surpass $7.5 trillion by 2031. Chetan Ahya, Morgan Stanley's Chief Asia Economist said, "Its share of global exports could also double over that period, while the Bombay Stock Exchange (BSE) could deliver 11 percent annual growth, reaching a market capitalization of $10 trillion in the coming decade." Talking about India’s exports, it can definitely play a significant role in making India the third largest economy in the world in the coming years. In the financial year 2022-23, India’s total exports (service and merchandise) crossed the mark of $750 billion and it is estimated that the exports would cross the mark of $1 trillion in the current financial year. India’s overall exports (merchandise and services combined) rose by 13.84 per cent year-on-year to $770.18 billion in 2022-23. Overall imports rose at a sharper pace of 17.38 per cent to $892.18 billion. India’s overall trade deficit widened to $122 billion in 2022-23 as against $83.53 billion in the previous year.
Source: Ministry of Commerce and Industry
India wants to reduce the amount of inexpensive, non-essential imports through quality control orders (QCOs) and to replace imports with domestic manufacturing by rewarding manufacturers through PLI programmes. By investigating its export potential in fintech, the financial services industry, transportation, accounting, and legal services, the government is attempting to enhance India's exports of services from the non-IT sector. India is aiming to establish FTAs and lower tariffs with countries that have a significant market for Indian textiles.
Foreign exchange reserves play an important role in the stabilisation of a nation’ economy. It offers protection from unforeseen external shocks. Typically, reserve currencies like the dollar are used to maintain it. The fundamental goal of holding foreign exchange reserves is to preserve confidence in the monetary and exchange rate management policies as well as to preserve currency liquidity to absorb external shocks. Talking about India’s forex reserves, India's foreign exchange reserves have passed the $600 billion threshold for the first time since May 2022, marking an important milestone. The remarkable $609 billion level of foreign exchange reserves as of July 14 was a 15-month high. This outstanding accomplishment has occurred despite a background of rising dollar inflows into the national economy. The reserves experienced an astounding $12.74 billion boost from the previous week, which is the greatest weekly gain in the last four months. Therefore, with sufficient forex reserves despite global headwinds, India’s economy would continue to grow at projected rates.
According to experts, India's foreign exchange reserves are currently at a comfortable level thanks to the Reserve Bank of India's sustained involvement and the prospect of less unpredictable revaluation fluctuations. Additionally, a country's forex reserves give markets and investors some assurance that it can fulfil its international obligations. As a result, the Financial Year 2022-23 and the Quarter 4 of the FY22-23 (January to March) witnessed a happy ending as the Q4 recorded the highest ever total fresh investments of Rs 14.6 lakh crore, dominated by private sector outlays that also hit an all-time high of Rs 10.5 lakh crore.
According to the most recent Survey of Project Investment in India, new investment rose by a staggering 91.97 percent year over year in FY2023. The public sector also boosted its investment pledges by 94.76 percent, while the private sector nevertheless retained its dominance in the project investment environment. The new investments increased significantly from Rs 19,27,214.28 crore in FY2022 to Rs 36,99,673.33 crore in FY2023. The overall number of projects climbed from 10,445 in FY2022 to 10,509 in FY2023.
New businesses including Green Hydrogen, Semiconductors & Display Fabs, Electric Vehicles, and Data Centres garnered high-ticket investment intents, while sectors like Roadways, Solar Power, and Real Estate continued to attract increased new investments. While both the public and private sectors recorded substantial increases in fresh investment in FY2023, the private sector witnessed an increase of 90.71 percent in FY2023 over the 144.39 percent growth it had seen in FY2022.
In FY2023, 3,804 new projects of Rs 25,31,800.03 crore were launched by the private sector, making up 68.43 percent of all new investments declared during the survey period. On the other hand, 6,705 new projects worth Rs 11,67,873.30 crore were launched by the public sector (including Central and State), representing a 94.76 percent increase from the previous year.
Source: Projects Today
Among all the major sectors, manufacturing sector has emerged as the dominant sector in terms of investment, with its share in total fresh investment increasing from 41.93 percent in FY2022 to 53.66 percent in FY2023. Though the number of projects declined from 2,759 in FY2022 to 1,912 in FY2023, new projects outlay in the manufacturing sector more than doubled, from Rs 8,08,159.35 crore in FY2022 to Rs 19,85,343.05 crore in FY2023.
Source: Projects Today
NR Bhanumurthy, Vice-Chancellor, Dr BR Ambedkar School of Economics University, Bengaluru said given the current level of savings and investments, the Indian economy has the potential to grow by 7 percent in the next few years provided that there are no further shocks. “For growth higher than this, we would require more structural changes,” he said, cautioning that the kind of shocks the Indian economy faces is much more severe.
Though India is expected to become the third largest economy by 2027, it faces a lot of hurdles. One of the major challenges is ‘unemployment.’ India has recently overtaken China to become the most populous country in the world, with this India has an advantage of the demographic dividend which can play a significant role in making India the third largest country by 2027 but this demographic dividend without sufficient employment opportunities can become demographic burden.
One of the other significant challenge is the poor employment generation by the central government. Last year, the Lok Sabha was informed by the Minister of Personnel that, between 2014 and 2022, around 22 crore applications for government jobs were received, but that only 7.2 lakh people were actually hired.
Source: Reply to Lok Sabha by Union Minister of state for Personnel Jitendra Singh
The year 2018-19 witnessed the lowest job creation by the central government as only 38,100 jobs were created. The following year witnessed the highest job creation in last eight years as 1,47,096 central government jobs were created in different ministries and departments of the central government. The highest number of job application were received in 2018-19 which witnessed the lowest job creation. Around 5,09,36,479 applications were received for jobs across various central government ministries and departments.
Though there has been low direct job creation r filling the positions in the ministries and departments of the central government, the Modi government has launched a number of schemes which offers employment opportunities to the youth. Make in India, Start-up India, Digital India, Smart City Mission, Prime Minister's Employment Generation Programme (PMEGP) and Aatmanirbhar Bharat Rozgar Yojana (ABRY) are some of the schemes launched by the central government aimed at job creation.
