New India: The World’s Next Growth Engine

The pandemic has proven to be the tipping point in India’s long-awaited emergence as the world’s next growth engine. New India is bearing fruit at a time when one-third of the global economy is slowing. Finance Minister said at FICCI’s 95th annual general meeting that the upcoming budget will set the template for the next 25 years, which is India’s Amrit Kaal.

A bleak global outlook

  • Global growth prospects: According to the International Monetary Fund (IMF), global growth will nearly halve to 3.2% in 2022 and then fall further to 2.7% in 2023, reflecting slowing growth in the United States, China, and the European Union.
  • Global inflation: Rising food and energy prices have caused global inflation to peak at 8.8 percent in 2022, but it is expected to fall to 6.5 percent in 2023 and 4.1 percent in 2024.
  • Developed countries are struggling to control inflation: Developed countries have implemented excessive stimulus measures. According to a McKinsey Global Institute report, in 2020 and 2021, global households added $100 trillion to global wealth on paper as asset prices rose and $39 trillion in new currency and deposits were minted, while debt and equity liabilities increased by about $50 trillion and $75 trillion, respectively, as governments and central banks stimulated economies.
  • The Russia-Ukraine conflict is causing financial hardship: Meanwhile, the ongoing Russia-Ukraine conflict is causing financial hardship far beyond the immediate region.
  • China’s covid policy has disrupted the supply chain: While China’s Covid policy has disrupted supply chains, they are now threatened by the potential consequences of an abrupt reversal.
  • The majority of India’s inflation is imported: India’s fight against inflation, which is largely imported, has been aided by coordinated fiscal and monetary policy, with a little help from falling commodity prices.

Despite significant challenges, India stands out.

  • The world’s fastest-growing large economy: However, India stands out as a rare bright spot, with the economy expected to grow around 7% in FY23 and 6.1-6.5% in FY24, retaining the title of the world’s fastest-growing large economy.
  • Inflation is falling within the RBI’s tolerance level: In a positive sign, retail inflation fell to 5.88 percent in November, bringing it back within the RBI’s tolerance band after 11 months. While it is too soon to declare victory in terms of inflation control, policymakers must now chart a course that prioritises growth.
  • India is on track to overtake Japan and Germany as the world’s third largest economy: After recently surpassing the United Kingdom to become the world’s fifth-largest economy, India is expected to surpass Japan and Germany before the end of the decade to become the world’s third-largest economy.
  • What enabled this to happen: Reforms aimed at improving the ease of doing business and lowering the cost of doing business in a large, unified domestic market, as well as a focus on boosting the manufacturing sector through Production Linked Incentive (PLI) schemes, are attracting large investments, including in critical areas such as semiconductors.

What does India have to offer the rest of the world?

  • G20 leadership for structural transformation: Its priority as G20 president is to focus on areas that have the potential to bring about structural transformation, resulting in faster, more inclusive, and resilient growth.
  • LiFE (Lifestyle for the Environment) concept: Similarly, the LiFE (Lifestyle for the Environment) concept draws on ancient sustainable traditions to reinforce modern-day environmentally conscious practises.
  • Sharing of information: Finally, knowledge sharing in areas such as digital public infrastructure and financial inclusion will enable more people to use disruptive technologies.

@the end

Domestic and global investors must now come forward and participate in the India growth story, which will provide a much-needed boost to global growth in the future. 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 its many advantages.

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