The world is looking to India for leadership since entrenched, self-serving positions have left very little wriggle room for others to have any moral suasion to ease geopolitical tensions.
Investors – both domestic and global – must participate in the India growth story.
Written by Subhrakant Panda
January 10, 2023 07:43 IST
The pandemic has proven to be the breakout moment in India’s long overdue emergence as the world’s next engine of growth. Starting with a measured approach to the timing and quantum of the economic stimulus while supporting those at the bottom of the pyramid to embarking upon bold reforms, Prime Minister Narendra Modi’s vision for a New India is bearing fruit at a time when one-third of the world’s economy is facing a slowdown.
The world is looking to India for leadership since entrenched, self-serving positions have left very little wriggle room for others to have any moral suasion to ease geopolitical tensions. In that sense, the mantle of the G20 presidency has come at the right time, allowing India to influence the global agenda based on its own priority of accelerated, inclusive and resilient growth.
The inherent strength and prospects of its economy are the foundation on which India has built the credibility necessary to occupy a seat at the high table. Hence, a laser-sharp focus on growth is imperative to both better the prospects of its people as well as lead the world. And who knows this better than Finance Minister Nirmala Sitharaman. Speaking at FICCI’s 95th annual general meeting, she said that the upcoming budget – the last full budget before general elections — will “set the template” for the next 25 years, which is India’s Amrit Kaal.
India’s rise comes at a time when there are significant challenges, given a gloomy global outlook. According to the International Monetary Fund (IMF), global growth will nearly halve to 3.2 per cent in 2022 and fall further to 2.7 per cent in 2023, reflecting stalling growth in the US, China and the Euro Zone. Higher food and energy prices have led to global inflation peaking at 8.8 per cent in 2022 which is, however, expected to decline to 6.5 per cent in 2023 and 4.1 per cent in 2024. India’s own fight against inflation, which is largely imported, has been aided by fiscal and monetary policy working in tandem with a little help from easing commodity prices.
Developed nations are struggling to tame inflation as they adopted excessive stimulus measures. According to a report by the McKinsey Global Institute, in 2020 and 2021, “households globally added $100 trillion to global wealth ‘on paper’ as asset prices soared and $39 trillion in new currency and deposits were minted” and “debt and equity liabilities increased by about $50 trillion and $75 trillion, respectively, as governments and central banks stimulated economies”. Meanwhile, the continuing Russia-Ukraine conflict is inflicting fiscal pain beyond the immediate region while China’s Covid policy has disrupted supply chains, which are now once again threatened by a potential fallout of an abrupt reversal.
However, India stands out as a rare “bright spot” with the economy estimated to grow around 7 per cent in FY23 and a growth forecast of 6.1-6.5 per cent in FY24, thus retaining the tag of the fastest-growing large economy in the world. In an encouraging sign, retail inflation eased to 5.88 per cent in November, thus coming within the RBI’s tolerance band after 11 months. While it is too early to declare victory in terms of taming inflation, policymakers must now chart out a path that prioritises growth.
Having recently surpassed the UK to become the world’s fifth-largest economy, India is likely to overtake Japan and Germany before the end of the decade to become the third-largest economy in the world. This has been made possible by reforms aimed at enhancing ease of doing business and reducing the cost of doing business in a large, unified domestic market along with a focus on boosting the manufacturing sector through the Production Linked Incentive (PLI) schemes, which are helping attract large investments including in critical areas like semiconductors. With the government having done the heavy lifting in terms of public infrastructure capex during the pandemic period and its immediate aftermath, the attention must now shift to the private sector investment cycle which has been steadily gaining momentum.
India has much to share with the world at a time when there are very few beacons of hope. Its priority as G20 president is to focus on areas, which have the potential to bring about structural transformation leading to accelerated, inclusive and resilient growth. Similarly, the concept of LiFE (Lifestyle for the Environment) draws upon ancient sustainable traditions to reinforce modern-day environmentally conscious practices. Finally, knowledge sharing in areas like digital public infrastructure and financial inclusion will enable the wider adoption of disruptive technologies.
Investors – both domestic and global – must now come forward and participate in the India growth story which, in turn, will give a much-needed boost to global growth going ahead. Speaking at the World Economic Forum last year, PM Modi said “Make in India, Make for the World”. There has never been a better time to invest in India and reap the benefits of what it has to offer.
The writer is MD, IMFA and President, FICCI
Source: Indian Express