Indian economy a beacon of stability amid global volatility

THE TIMES KUWAIT REPORT
In his address to world leaders, business elites and economists gathered this week at the annual World Economic Forum in Davos, Switzerland, United Nations Secretary-General António Guterres stated: “Your focus this year is on ‘Collaboration for the Intelligent Age’, but let’s face it. When many people look around the world, they don’t see much collaboration. And, perhaps to their minds, not enough intelligence.”
Despite progress on many fronts, many of our world’s problems are getting worse, said the UN Chief. He added, “We face widening geopolitical divisions, rising inequalities and an assault on human rights… On every front, our systems of governance are often ill-equipped to deal with these challenges… but reforming institutions requires a reform in mindsets… and I am not convinced leaders get it.”
Amid the global volatility and challenges, India appears a relatively safe haven offering stability, a collaborative environment, and continued economic growth. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three global economic powers over the next 10-15 years, backed by its robust democracy and strong partnerships.
India’s appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money being raised by India-focused funds in recent years are evidence of investor faith in the ‘Invest in India’ narrative. A major attraction of India to investors is that the country is primarily a domestic demand-driven economy, with consumption and investments contributing to 70 percent of the economic activity.
With an improvement in the economic scenario and the Indian economy recovering relatively quick;y from the economic downturn brought on by the COVID-19 pandemic, several investments and developments have been made across various sectors of the economy. Exports fared remarkably well during the pandemic and aided recovery when all other growth engines were losing steam in terms of their contribution to GDP.
Going forward, the contribution of merchandise exports may waver as several of India’s trade partners witness an economic slowdown. According to the Ministry of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles Indian exports are expected to reach US$ 1 trillion by 2030. During the period April-September 2024, India’s exports stood at $211.46 billion, with the three top export commodities being Engineering Goods accounting for 26.57 percent of exports, followed by Petroleum Products (16.51%) and electronic goods (7.39%).
Real GDP or GDP at Constant (2011-12) Prices for the period Q1 2024-25 is estimated at $524 billion against the $491 billion during the same period in 2023-24. Rising employment and increasing private consumption, supported by rising consumer sentiment, is expected to support GDP growth in the coming periods. Strong domestic demand for consumption and investment, along with Government’s continued emphasis on capital expenditure are seen as among the key drivers of the GDP.
Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth, with the sector’s success being captured by a number of High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback.
There are 113 unicorn startups in India, with a combined valuation of over $350 billion. Several new startups are poised to list on stock exchanges in this fiscal year, with the fintech sector likely to generate the largest number of future unicorns in the country; currently India has the third-largest unicorn base in the world. Moreover, with India ranked 3rd in the renewable energy country attractive index, the government is focusing on renewable sources by achieving 40 percent of its energy from non-fossil sources by 2030, and achieving the country’s ambitious target of net zero emissions by 2070.
However, India’s growth story is not without its challenges. According to the McKinsey Global Institute, India needs to boost its rate of employment growth and create 90 million non-farm jobs between 2023 to 2030 in order to increase productivity and economic growth. The net employment rate needs to grow by 1.5 percent per annum from 2023 to 2030 to achieve 8 to 8.5percent GDP growth between the same time periods. Meanwhile, India’s current account deficit (CAD) narrowed to 0.7 percent of GDP in FY24. The CAD stood at $9.7 billion for the Q1 2024-25 from $8.9 billion in Q1 2023-24 or 1.1 percent of GDP. This was largely due to a decrease in merchandise trade deficit.
The World Bank has also suggested that India should continue to prioritise lowering inequality while also putting growth-oriented policies into place to boost the economy. In view of this, several new initiatives were launched in the recent past that have resulted in positive developments, such as:
- As of October 11, 2024, India’s foreign exchange reserves stood at $690.43 billion.
- In 1H 2024, India saw a total of $31.5 billion in Private Equity-Venture Capital (PE-VC) investments.
- India secured 39th position out of 133 economies in the 2024 Global Innovation Index, rising from the 81st position in 2015.
- India ranks in 3rd position in the global number of scientific publications.
- In September 2024, the gross Goods and Services Tax (GST) marked its highest monthly revenue collection at $20.83 billion.
- In August 2024, the overall Index of Industrial Production (IIP) stood at 145.6, with the indices of Industrial Production for the mining, manufacturing and electricity sectors standing at 125.1, 147.1 and 219.3, respectively.
- India’s Consumer Price Index (CPI) based retail inflation reached 5.49 percent (Provisional) for September 2024.
- Foreign Institutional Investors (FII) inflows between April-July (2023-24) were close to $9.67 billion, while Domestic Institutional Investors (DII) sold around $540 million in the same period.
- Foreign Portfolio Investors (FPIs) invested $13.89 billion during the first-half of 2024.
Over the years, the Indian government has introduced many initiatives as well as developed various effective policies and programs that have led to strengthening growth of the national economy, and improving financial stability benefiting citizens. Additionally, a number of the government’s flagship programs, including Make in India, Start-up India, Digital India, the Smart City Mission, and the Atal Mission for Rejuvenation and Urban Transformation,have created immense opportunities in India, leading to India’s rapid economic growth over the past decade and supporting the country’s development going into the future.