INDIA, THE GLOBAL ‘GROWTHSTAR’
India is a beacon of hope in an uncertain world where growth is slowing down, and geopolitical complexities abound. It is the fastest-growing large economy, expected to occupy the third spot by 2027. This journey is not the outcome of a stroke of luck but a trifecta of three factors:
Size matters
The implementation of GST created a unified domestic market, a fertile ground for businesses to thrive. The size and diversity of the population have provided opportunities to homegrown entities and been a bulwark against external volatility. It has also made it a strategic market for MNCS. Steadily increasing GST collections, which hit an all-time high of ₹ 1.87 trillion in April and an average of ₹ 1.66 trillion a month this fiscal, indicate rising economic activity and greater formalisation of the economy. It has also enabled Government of India (GOI) to allocate resources to priority sectors.
Reformative years
India's commitment to reforms has been transformative. By focusing on measures to enhance the ease of doing business, reduce the cost of doing business and improve the ease of living, GOI saw an opportunity in the adversity of the pandemic. In addition to GST, several other schemes such as IBC, PLI, PM Gati Shakti National Master Plan, National Logistics Policy and decriminalisation of minor offences have added to India's allure as an investment destination.
Even the domestic investment outlook is well-placed with cyclical sectors having deleveraged and average capacity utilisation across the spectrum in manufacturing touching 75%, according to a January 2023 Ficci survey, setting the stage for private sector investment to gain momentum.
India's approach of eschewing an aggressive stimulus early on during the pandemic, while supporting those at the bottom of the pyramid and focusing on structural reforms, proved right. It has since made the job of managing inflation easier compared to advanced economies that went overboard.
Banking on the future
According to a June 2023 IMF working paper, a sample of 67 central banks showed 'median balance sheet increased by 6% in 2020-21. In 10% of cases, balance sheets expanded by more than 20% of GDP', and, as the study puts it, 'expansion in central bank assets was larger in advanced economies where quantitative easing programmes drove balance sheet expansion'. Today, those advanced economies are struggling to control inflation.
Dig infra dig
The massive investment in physical infrastructure, with a record outlay of ₹ 10 trillion in the last Union budget, and digital public infrastructure (DPI) has connected and empowered people. It has also enabled far-flung regions to contribute to and benefit from India's growth. The JAM (Jan Dhan-aadhaarMobile) trinity laid the base for lasersharp targeting of recipients and minimal leakage through DBTS.
Innovations such as UPI have led to a nearly 50% share of global real-time digital payments, with PWC predicting that it will achieve one billion daily transactions by 2026-27. Meanwhile, Cowin enabled the world's largest vaccination drive, with over two billion doses of the Covid-19 vaccine being administered and digital certificates issued.
Demonstrating demographics
This is a huge factor in India's rise and future growth trajectory. At a point in time when the world is ageing, the median age in India is 28.4, and the share of the working-age population in the total population stands at 67%, according to a January 2023 EY report.
Importantly, the working-age population will continue to outnumber the dependent population for at least another three decades. The report says,
India's approach of eschewing an aggressive stimulus early on during the pandemic, proved right. It has since made the job of managing inflation easier
'This young population not only reinforces India's competitive advantage in the services and manufacturing sectors, but also unleashes the consumption power of a young population towards discretionary expenditure.'
Access to information, markets and opportunities in the world's largest digitally connected democracy have transformed the lives of millions and enabled India to leapfrog legacy constraints. Our economic rise has implications for the world, with IMF stating that India's contribution to global growth will increase by 200 bps to 18% over the next five years.
There is no other country with these three factors to lift itself and impact the world's growth trajectory.