SOURCE : FINANCIAL EXPRESS | PUBLISHED : 2 AUG 2024
India’s economy remains robust amid global challenges, with an 8.2% GDP growth in FY24 driven by digital advancements, infrastructure investments, and political stability, contributing significantly to global economic expansion alongside China.
In the realm of global economic dynamics, India’s economy continues to remain stable amidst global challenges. Asia’s emerging markets are increasingly becoming the driving forces of global growth. Recent projections by the International Monetary Fund (IMF), highlight India’s significant role in contributing to half of the world’s economic expansion along with China. According to the Economic Survey 2023- 2024 presented by Finance Minister Nirmala Sitharaman, India’s GDP grew by 8.2% in FY24 exceeding the 8% mark in three out of four quarters. This can be attributed to the digital revolution, massive government infrastructure investments, an expanding middle class, and political stability.
The Fastest Growing Major Economy in 2024
The UN expects India to remain the “fastest-growing major economy” this year, driven by strong domestic demand and significant growth in the services and manufacturing sectors. This growth is likely to occur despite the sharp deceleration expected for the global economy, which is expected to slow from the estimated growth of 2.7% in 2023 to 2.4% in 2024, according to the UN’s World Economic Situation and Prospects 2024 report.
Some economists have even gone so far as to say that India’s GDP could grow at a higher pace than anticipated by the UN. In June 2024, the NDA led government by Shri Narendra Modi came back to power with a historic mandate for a third term, this signals political and policy continuity for India.
The optimism regarding India’s growth story continues with the World Economic Forum (WEF) stating that the nation could become the world’s third-largest economy over the next five years. After all, India has emerged as both a geopolitical and economic power to be reckoned with amid a challenging global economic backdrop. Following the impact of the nation’s presidency of the G20 in 2023, the WEF believes that India is well positioned to “play a defining role in shaping the future of the global economy in 2024 and beyond.”
The nation proved to be a critical growth engine for the world, accounting for 16% of the global economic growth in 2023. In addition, India’s 7.2% growth in fiscal 2022-2023 was the second highest among the G20 countries and almost double the average of the emerging economies.
What Makes the Economy So Resilient?
Apart from the continued domestic demand, government efforts to initiate structural reforms and maintain stability have played a key role in ensuring India’s resilience despite global challenges. In fact, interest rate hikes also failed to have any significant impact on domestic consumption. Stable consumption, accompanied by robust investments, has been driving economic growth.
FDI Investments
The Indian government’s public investment push has encouraged private investment, while also leading to a rise in demand, bolstering the construction and manufacturing sectors. However, the net inflows of foreign direct investments (FDIs) to India contracted from $42.0 billion in FY23 to $26.5 billion in FY24.
Now, a government focus on structural and policy initiatives to drive inclusive growth, sustain domestic demand, and promote the adoption of emerging technologies to improve productivity will be key to maintaining economic growth.
Banking & Financial Services
India’s banking and financial sectors demonstrated robust performance, characterized by widespread and double digit growth in bank credit. Additionally, the Indian stock market experienced a notable rise in the capitalization, positioning India as the fifth largest globally in terms of market capitalization to GDP ratio.
Infrastructure
The government has been investing in upgrading connectivity and infrastructure through projects like Sagarmala and Bharatmala, the Smart Cities Mission and the India AI Mission. Experts predict that the government will continue to invest in the production-linked incentive scheme (PLI), as well as emerging sectors, such as renewables and semiconductors.
Global Trade
Despite the global economy’s meagre growth, geopolitical tensions and sticky inflation acting has major headwinds, India’s international trade has remained robust. India has added more countries to its repertoire of trading partners and improved its rank in the Logistics Performance Index to 38. The country’s current account deficit shrank to 0.7% in FY24, with services exports growing by a robust 4.9% to $341.1 billion.
India emerging as the fastest growing major economy and its stable business environment boosted investor sentiment and triggered positive net inflows in foreign portfolio investment in FY24. The country is likely to remain in the spotlight among retail and institutional investors, both domestic and foreign.
SOURCE : FINANCIAL EXPRESS | PUBLISHED : 2 AUG 2024
