Why India Will Remain The Fastest Growing Economy

Three major factors are responsible for ensuring GDP growth takes in India remain, and will remain high

In the den and noise that surrounds daily news, the real picture is often obscured by isolated events or markers that seem significant at any given point of time. In India, that kind of news has become a common phenomenon. One day comes news that the services sector has grown the fastest in more than a decade. The next day comes news that growth in industrial production has dropped sharply. Then again, one day news comes that while toy imports have decreased dramatically even as exports have shot up. The very next day comes news that the looming global recession has led to Indian exporters of yarn and textiles facing a 50% drop in orders. So is the glass half full or half empty? Are growth prospects for the Indian economy bright or bleak?

About a month ago, the World Bank released its flagship repot on ‘Global Economic Prospects’. According to the report, the war between Russia and Ukraine has further aggravated the crisis that was triggered by the Covid pandemic. It says that the global economy is facing a near recession and it has significantly reduced the global GDP growth forecasts it had announced in January, 2022. The World Bank says that even the Indian economy will not be spared as headwinds coast along the entire world. In the same breath, it feels confident in forecasting that India will be the fastest growing economy in the world till at least 2024. As the accompanying chart shows, even the miracle GDP growth rates achieved by China for three decades are now slowing down with its economy expected to grow at 5.2% and 5.1% respectively in 2023 and 2024. The largest economy in the world, the United States, is expected to grow at 2.4% and 2% respectively in the same period. Emerging economies South Africa and Brazil seem to be in trouble. While South Africa is expected to grow at 1.5% and 1.8% respectively, Brazil is expected to see GDP growth rates of 0.8% and 2% respectively.

India, on the other hand, is predicted to grow at 7.1% and 6.5% in the same duration. Clearly, India would remain the fastest growing major economy of the world for three consecutive years. With population growth rates falling, per capita incomes are bound to grow at a rapid pace impacting poverty which had become a cause for concern once again during the pandemic. Three major factors are responsible for ensuring GDP growth takes in India remain, and will remain high. The first is massive government investment in infrastructure that could average $ 1.4 trillion a year. The second would be the exceptionally strong performance of the services sector both domestically and in global markets. And the third is the remarkable growth in exports of manufactured goods from India. All augur well for India.