India looks set to sustain a resilient growth trajectory in the next three years to record two years of above 7 per cent growth and stay on the course to become the third-largest economy in the world with a GDP of $5 trillion by 2027, according to the Finance Ministry.
The Government has set a higher goal of becoming a ‘developed country’ by 2047 and this goal looks achievable given a robust backdrop a growth of 7.6 per cent in real terms in the first half of the current financial year – compared to the first half of FY23 – and with the financial year FY24 marking the third successive year of 7 per cent plus strong growth of the Indian economy even as the global economy struggles to grow at more than 3 per cent.
The view is reinforced by the National Statistical Office’s First Advance Estimates, pegging India’s real GDP to grow at 7.3 per cent in FY24, higher than the forecast made by various national and international agencies, observes a review by the Finance Ministry, of the state of the Indian economy and its journey in the last 10 years.
The Finance Ministry identifies three global trends and India’s strengths in that context. First, countries are only now discovering the enormous integration of global supply chains that have taken place in the last few decades and the recent events in the Red Sea may have brought back concerns over reliance on global supply chains, further aggravating the slower growth in global trade in 2023. Closely related to this challenge is the advent of Artificial Intelligence with the profound and troubling questions it poses for growth in services trade and employment and third, the energy transition challenge that has led to a single-minded focus on reducing carbon emissions.
The Finance Ministry places the Indian economy as strongly placed than ever to take on these three key challenges because of the policies adopted and implemented in the last decade. The Union government has built infrastructure at a historically unprecedented rate, and it has taken the overall public sector capital investment from Rs 5.6 lakh crore in FY15 to Rs 18.6 lakh crore in FY24, as per budget estimates. That is a rise of 3.3X. Whether the total length of highways, freight corridors, number of airports, metro rail networks or the trans-sea link, the ramp-up of physical and digital infrastructure in the last 10 years is real, tangible and transformative.
India’s robust Digital Public Infrastructure has transformed the authentication ecosystem, reducing the cost of conducting e-KYC from Rs 1000 to Rs 5. It has also enabled online, paperless, and cashless digital access to various public and private services. The proliferation of internet connectivity and smartphones in India, coupled with rapid urbanisation and the rising influence of the middle class, have propelled the e-commerce market, with ONDC opening global markets for even the smallest business.
The review underlines India’s emergence as the world’s fourth largest stock market in the world by market capitalisation, overtaking Hong Kong thanks to significant interest from domestic and global investors in the Indian stock market and sustained IPO activity has placed the Indian market fourth in the world by market capitalisation.
The Government also credits structural reforms implemented since 2014 for strengthening the macroeconomic fundamentals of the economy. While the unification of the domestic markets brought in by the adoption of the GST has incentivised production on a larger scale, enhanced economic efficiency while reducing logistics costs, the reforms undertaken to strengthen the financial sector have helped clean up the balance sheets of banks and corporates and emboldened banks to resume lending to all sectors of the economy.
The public sector capital investment has surged in the last 10 years buoyed by investment incentives and initiatives to ease business compliances and remove policy uncertainties have created an ecosystem for start-ups to nurture. The firms undergoing the IBC resolution process have witnessed a significant improvement in their performance in the post-resolution period.
Addressing the third trend, India’s unwavering commitment to ensuring steady economic growth is generating resources for investment needed for climate change adaptation, building resilience, and mitigating emissions. India has adopted a comprehensive approach that addresses adaptation, resilience building and mitigation action as part of its contribution to the global response to climate change.
The review emphasises the role of the all-inclusive welfare approach of the government which is expected to contribute to the enlargement of the consumption base through the expansion of the middle class. Over the last decade, the Indian concept of welfare has been significantly transformed into a more long-term-oriented, efficient, and empowering avatar, the report points out. The PM Jan Dhan Yojana has increased the proportion of women having a bank account that they themselves use, from 53 per cent in 2015-16 to 78.6 per cent in 2019-21. 26 and female participation has been encouraging in the wave of human capital formation through Skill India Mission and Start-up and Stand-Up India. Female Gross Enrolment Ratio in senior secondary education more than doubled from 24.5 per cent in FY05 to 58.2 per cent in FY22, and the female GER in higher education quadrupled from 6.7 per cent in FY01 to 27.9 per cent in FY21.
The Finance Ministry report asserts the role of the people of India as not only beneficiaries of government programmes during the last 9 years but as facilitators of India’s economic success and as India embarks on her ‘Amrit Kaal’, it is with the confidence that challenges to growth and inclusive development are stepping stones and not obstacles.
