HOW do you reconcile the naysayers from those who consistently predict a six per cent plus growth for the Indian GDP overall in 2023-24?
One path could be the consistent outlook and utterances that global financial institutions, brokerages and multilateral institutions have been making about India these past few months. The World Bank, for example, earlier this week, in a statement said: “Growth in India is expected to slow to 6.3 per cent in FY2023/24 (April-March), a 0.3 percentage point downward revision from January, with private consumption constrained by high inflation and rising borrowing costs, and Government consumption by fiscal consolidation,” the World Bank said.
Months earlier, the United Nations World Economic Situation and Prospects report anticipated that the Indian economy was projected to see a growth of 6.7 per cent in the calendar year 2024.
India a ‘bright spot’
One media report quoted Hamid Rashid, Chief of the Global Economic Monitoring Branch at the UN Department of Economic and Social Affairs, describing India as a “bright spot” in the world economy. He highlighted that India’s inflation has significantly decreased, reinforcing the positive outlook. The projection for India’s economic growth remains unchanged since January, instilling confidence in the forecast for the year.
Of course, there are natural factors that could create speed bumps along the way – commodity price fluctuation, recession in the West that is already setting in, the continuing conflict in Ukraine, elections in India(most elections are natural speed breakers), unsettled states, border issues and what have you. By and large, though, a six per cent plus growth is the mantra everyone is chanting.
Amish Mehta, Managing Director and CEO of credit rating agency CRISIL, says, “India’s medium-term growth prospects are healthier. Over the next five fiscals, we expect GDP to grow at 6.8% annually, driven by capital and productivity increases. What is also good to see is the increasing sustainability footprint of capex. At present, nearly 9% of the infrastructure and industrial capex is green. We see this number rising to 15% by fiscal 2027. Down the road, the impact of climate risk mitigation will be felt across revenue, commodity prices, export markets and capital spending.”
While there is capital and productivity expansion on one side, there are other factors pegging the growth down. CRISIL Director Anuj Sethi said, “Headwinds in key markets, especially the BFSI (banking, financial services and insurance) segment in the US and Europe, will affect the revenue growth of domestic IT services companies.” What this CRISIL assessment means is that the over Rs 10 lakh crore sector could end up with a growth of 10-12 per cent as against the estimated growth of close to 20 per cent.
Morgan Stanley report
A recent Morgan Stanley report states that India will be a seven trillion economy in less than a decade(2032). What that report has dissected across all channels and newspapers this past fortnight is that there are some things that almost everybody—the naysayers and the aayes agree on. These include the fact that:
- Bad loans from banks and corporate debt have both come down
- Goods and services tax collections have improved thanks to better implementation (and high inflation)
- Services exports are also looking up The investment scene seems to be turning around
- The stock boom with a record number of new entrants to equity trading The rising share of digital
- transactions as a percentage of GDP outlining a formalisation of the economy
- Insolvency and bankruptcy code Flexible inflation targeting Focus on FDI
- Government support for corporate profits
- A new law for the real estate sector MNC sentiment which is noticeably high
- The direct transfer of subsidies to beneficiaries
“This India is different from what it was in 2013. In a short span of 10 years, India has gained positions in the world order with significant positive consequences for the macro and market outlook. India has transformed in less than a decade,” said Morgan Stanley in its report and added that India “will emerge as a key driver for Asia and global growth.”