India’s unbridled economic performance
The global economy has been undergoing severe changes ever since the inception of the COVID-19 pandemic. The repeated influx of infections in the major developing and developed countries, along with several other geopolitical disruptions have extensively impacted the global value chains. However, despite such challenges, several countries are on their respective resilient roads to recovery. Among these, India has shown the most consistent improvement in macroeconomic performance among the top ten economies in the world.
Data for India has recently been updated by the International Monetary Fund. The average US rupee/dollar exchange rate for the fiscal year 2021–2022 underwent the most significant revision. In contrast to the previously reported INR 77.7 and nearly the same as the INR 74.2 for 2020–21, the adjusted exchange rate for 2021–22 is INR 74.4/$. The fourth-highest dollar GDP growth in India's history as a result of this correction was 19 per cent in 2021, which is still less than the 30 percent increase in 2007.
This paved the way for achieving the goal of a $ 5 trillion economy. In fact, 3.7 percent was the lowest GDP growth rate for India in 2019 since the country's 1991 reforms. Prime Minister Narendra Modi wanted to nearly double India's current $ 2.8 trillion economy to $ 5 trillion by 2025. India's contribution to global GDP from 2004 to 2013 was 78th highest. It moved up to 35th place in 2014–19 and is anticipated to move up to third place in 2022–2027. Indian GDP is projected by the IMF to reach $ 4.7 trillion in 2025, which is only 6 per cent less than the target of $ 5 trillion. In US dollars, 5.1 trillion is projected for India's GDP in 2026. In addition to this, the IMF’s World Economic Outlook Database anticipates the post Covid 2022-27 period to deliver the best growth performance yet, the per capita GDP is expected to increase by an average of 5.9 per cent.
According to data made public by the PHD Chamber of Commerce and Industry, the nation has also steadily strengthened its position over the previous four years in terms of international trade and ties. India is predicted to have the highest real GDP growth rate and merchandise export growth rate in 2022, at 8.2 per cent and 7.0 per cent, respectively.
According to Pradeep Multani, President, PHD Chamber of Commerce and Industry (PHDCCI), India is the only top ten leading economy that has consistently improved its economic performance over the past four years thanks to its effective and dynamic macro policy environment.
The Indian government has launched numerous programmes over the years to boost the economy of the country. The government has done a great job of creating laws and programmes that help residents enhance their financial stability as well as the economy's overall growth. The demand for exports has significantly increased as a result of India's recent rapid economic expansion. In addition, numerous government initiatives, including Make in India, Start-up India, Digital India, the Smart City Mission and the Atal Mission for Rejuvenation and Urban Transformation, have generated immense opportunities for better livelihoods in the country.
Therefore, economic growth in India is holding up better than expected amid persistent geopolitical worries, rising interest rates in the US and India, and high prices for crude oil and other commodities. The rate of economic activity has entirely recovered from the COVID-19 pandemic shock, according to electricity consumption, manufacturing PMI, exports, power supply, and other high-frequency indicators. The effective execution of PLI schemes, the expansion of renewable energy sources while diversifying import dependency on crude oil, and the support of the banking sector are expected to propel economic growth. The rise in the current account deficit will be helped by recent government attempts to increase revenue, and it will also ensure that any potential budgetary slippage is sufficiently contained.
To maintain the expanding economic momentum at this point, continued trade and industrial expansion would be essential. India's economic recovery will be greatly aided by additional support for MSMEs, the manufacturing, and agricultural sectors in their efforts to diversify the country's supply chains. This will increase India's economic resilience and enable even faster adjustment to these historically unprecedented times. India's economy is predominantly driven by domestic demand, with consumption and investments accounting for 70 per cent of all economic activity in the nation. As the economy has recovered from the COVID-19 pandemic shock, a number of investments and advancements have been made in a variety of economic areas. The country must, thus, emphasise reducing inequality while also implementing growth-oriented policies to stimulate the economy.
This has been co-authored by Ishita Sirsikar and Srijata Deb.