Is India's Economy Poised For Growth Despite A Volatile Global Economy of 2023?
Is the global economy on the verge of a recession? Can India withstand the shock that will be felt around the world? The International Monetary Fund has predicted a recession in 2023, based on the disastrous events of 2022, which have already sent shockwaves around the world.
The world has been overwhelmed by the fallout of geopolitical conflict, which has already pushed weaker economies such as Sri Lanka, Pakistan, and Bangladesh to the verge of collapse. Sri Lanka has suffered the consequences of bankruptcy, but the country is still standing thanks to India's $4 billion soft loan.
Now, Pakistan is verging towards economical collapse and the proof is in front of the world in the form of its foreign exchange reserve. Pakistan now has only $5 billion, which is disastrous for an import-dependent country.
However, the Indian economy is still navigating comfortably among its dilapidated neighbors. India is not only navigating the storm but it is sailing smoothly and also anchoring the global economy in a secure and peaceful environment. India is the only bright spot in the otherwise bleak global economy.
Why is the world banking on the Indian economy to weather the storm?
India is not immune to the effects of the Covi-19 pandemic and Russia's invasion of Ukraine. These two events nearly destroyed the supply chain network of goods and created the most serious problem of uncontrolled inflation.
But India somehow managed to maintain its growth by attaining the GDP growth of 7.0%. The collection of Goods and Services Tax (GST) has reached an all-time high, increasing by 15% this year to Rs 1.49 lakh crore(USD$17.92).
India also created an environment for entrepreneurs, allowing Indians to establish more than 100 unicorns worth $332.7 billion. India is the 3rd largest Unicorn base in the world. This year, Indians living outside of India sent a massive remittances of $100 billion, which is also historic.
In 2022, global inflation was at 50-year high: China witnessed the weakest growth in 45 years; the US dollar was its strongest in 20 years and the world saw the most aggressive rate hike cycle in close to 40 years.In India, inflation also reached a five-year high of 5.88%.
However, India recorded a growth of 9.7% in the 1st half of 2022-23, as against 506% in Indonesia, 3.4% in the UK, 3.3% in Mexico, 3.2% in Euro Area, 2.5% in France, 2.2% in China, 1.8% in the USA and 1.7% in Japan.
The Indian economy is expected to grow rapidly, according to global financial institutions. The World Bank predicts 6.5% growth in India, Asian Development Bank and Reserve Bank of India predict 7.0% growth, State Bank of India predicts 6.8% growth, and the OECD predicts 6.9% growth.
But India have to deal with some problems what others are facing:
What are those problems?
1. Following the start of Russia's war against Ukraine, the world was confronted with the reality of a strong dollar because the Federal Reserve of the United States increased the interest rate on its currency and continues to do so without giving impetus to other problems. As a result, every country's forex reserves are now uncertain because the dollar was accepted as the global currency during the Bretton Woods conference. India is experiencing the same issue, which has affected commodity prices in India and around the world.
2. India is also dealing with the twin balance sheet issue, as well as high corporate debt, and banks are dealing with some bad loans. The good news is that the corporate debt-to-GDP ratio is at its lowest in over a decade. Banks have also learned from their bad loan legacy by regulating their lacklustre policies.
3. Job cuts has became the headache for governments. Recently, some well-known IT and technology companies have reduced their workforce in order to keep their profits alive and reasonable for future operations.
4. Export has taken a heavy toll on export-oriented countries such as the United States and China. Export will not going to be rosy in 2023, because of recession in key western markets and geo-political crisis due to Russia-Ukraine war. However, Indian market is showing the positive result as others are going south. India recorded an export of nearly $500 billion, a record in Indian history, though India's imports remain around $630 billion due to crude oil imports from other countries.
Recent developments in Indian economy which is creating positive economic environment.
what are those developments?
1. India's foreign exchange reserve touched $560 billion.
2. Merchendise exports in September 2022 stood at US$ 32.62 billion.
3. Foreign Direct Investment(FDI) inflows in India US$ 4.8 billion.
4. Wheat and Paddy procurement of 1208 lakh metric tonnes from 163 lakh farmers, as well as a direct payment of MSP value of Rs. 2.37 lakh crore($31.74 billion).
5. Massive digitization in the field of payment system.
6. Foreign Portfolio Investment (FPI) increased exponentially as well, but some of it was withdrawn by investors due to the uncertainties created by volatile geopolitical events.
7. India introduced 5G to increase net penetration and upgrade its digital infrastructure. It will make it easier for entrepreneurs to reach out to people and build their businesses. India's digital economy is expected to reach $1 trillion by 2025.
8. India is well-positioned to be a significant data centre hub because of its cheap cost advantage, availability of trained labour, minimal climate risk, state government and robust projection legislation. Large world wide data centre operators, cloud service providers, hyperscalers, private equity investors and developers all made investments in the nation. The government's role in making India a data centre hub has recently gained prominence by making investment easier and hindrance free.
9. To influence investors in the country and make India a data centre hub, the Indian government proposed a new Data Protection Law for 2021. The law will allow for coordinated efforts on a variety of fronts, including 5G deployments, infrastructure development, and regulatory changes, and will help India build a large and strong digital ecosystem.
10. India may come up with new tax breaks and subsidies in the budget 2023 will entice more businesses to make investments in data centers and other manufacturing.
11. India is also heavily investing in the research and development of new technologies and solutions in order to attract more firms and create job opportunities.
Still there are some challenges in the Indian economy.
What are those challenges?
1. The most formidable challenge is unemployment, which currently stands at 8.0% and is trending upward.
2. Despite the fact that India's poverty rate is low at 4.0%, India must continue to work hard to eliminate this threat.
3. The next issue is education. India must improve its primary and secondary education infrastructure, as well as increase the penetration of education among its people through its excellent digitization policy.
India has been looted and battered by British for 200 years. They destroyed Indian economy which used to be the golden parrot of the world economy. When they left India make Indian economy the world's worst performing economy because they plundered it as they please. However, Indians work hard and build it place on the face of adverse opposition from entwined twins; the US and the UK. Even after Independence the US and UK tried to harm India by using Pakistan and terrorism as their tool. But India this year surpass its colonial master the UK and it will pass the US in the year 2045 or maybe before 2045.