Look Back At 2023: India's Year Of Resilient Growth
As 2023 comes to a close, it reminds us of the period marked by unprecedented challenges—a once-in-a-century pandemic, intense global conflicts, persistent inflation, and rising protectionism across many geographies. Amid this backdrop, India stands resilient, showcasing its strength on the world stage.
Having achieved milestones like a successful moon mission and hosting the G20 Summit, India exits 2023 with enhanced stability and a positive outlook for growth. India's influential role as the voice of the Global South has garnered regional support, potentially reshaping the G20 into a development-focused organisation.
India remains an attractive investment destination, boasting vast operational scale, a skilled talent pool, and leadership in technology and innovation. The consumption economy has been growing, drawing interest from global tech giants like Apple, eager to expand their networks within India. This growth is complemented by the policies and targeted incentives, coupled with substantial investments in infrastructure, affirming the government's commitment to bolstering this vital sector.
In the fiscal year 2022-23, India stood out as one of the swiftest-growing major economies with an impressive growth rate of 7.2 per cent. This rate ranked second-highest among G20 nations and nearly doubled the average growth seen in emerging market economies. The economic resilience was anchored in a sturdy domestic demand, substantial public infrastructure investments, and a fortified financial sector. Bank credit growth surged to 15.8 per cent in the initial quarter of FY23/24, surpassing the 13.3 per cent recorded in the same period of FY22/23. India has consistently held the position of the world's fastest-growing major economy for the past two years and is anticipated to maintain this top spot in 2024, propelled by the accelerating phases of urbanisation and industrialisation.
India's efforts to enhance the ease of doing business revolve around the systematic digitisation and streamlining of regulatory compliance processes across the entire business life cycle, spanning from inception to cessation of operations. Illustratively, the Union Budget for 2023-24 showcased the government's commitment through a significant reduction of over 39,000 compliances and the decriminalisation of more than 3,400 legal provisions.
Looking ahead, policy focus is set on attaining developed economy status by 2047, underlining a well-defined trajectory toward sustained growth and comprehensive development. This strategic roadmap reflects India's commitment to fostering a business-friendly environment and positioning itself as a significant player in the global economic landscape. A crucial element of India's strategic vision involves reducing logistics costs, a key factor in its ambitious goal to emerge as a pivotal player in global supply chains and achieve a $5-trillion economy by the close of 2025.
India's dedication to sustainable development is apparent in its emphasis on renewable energy. With a target to derive 40 per cent of its energy from non-fossil sources by 2030, the government is ambitiously striving for Net Zero Emissions by 2070, guided by the comprehensive 'Panchamrit' strategy. This commitment resonates with global initiatives to combat climate change, solidifying India's role as a conscientious contributor in the global pursuit of environmental sustainability.
India's Nifty 50 index soared to new heights, marking a remarkable 16 per cent increase this year. Currently, India's stock market holds the seventh position globally, boasting a substantial market capitalisation of US$3.989 trillion. Projections for 2024 indicate that banking, healthcare, and energy sectors are poised for high performance, while consumer goods, utilities, and chemicals might experience comparatively slower growth.
The International Monetary Fund (IMF) has raised concern regarding the enduring viability of India's debts, cautioning that the government debt may surpass 100 percent of the country's GDP in the foreseeable future. The Indian government has rightfully asserted that the sovereign debt risks are significantly constrained, primarily denominated in domestic currency. India firmly disputes the IMF's stand, citing historical shocks and underscoring the marginal rise in the public debt-to-GDP ratio.
The pre-election spending stimulus holds promise for reinvigorating weakened consumption. However, persistent concerns linger regarding food inflation and sluggish growth in the rural output and services sector. Despite increased government spending on infrastructure in recent years, which defied the global slowdown trend, there remains a notable shortfall in job creation, pointing to a pressing challenge for sustained economic progress.
Just a few months back, the rural demand outlook seemed bleak due to the challenges of an El Nino year, linked to insufficient rains and compromised food production. Nonetheless, the scenario shifted as numerous rural workers redirected their focus to abundant construction opportunities, propelled by the government's accelerated capital expenditure. Simultaneously, a robust demand for housing sustained property development, contributing to rural employment stability and preventing a decline in wages.
Government of India's job data reveals a concerning trend: since the pre-pandemic year 2018-19 and 2022-23, a portion of the labour force has reverted to agriculture, the sector with the lowest productivity. In 2022-23, agriculture's share of the workforce reached 45.8%, an increase of over three percentage points from 2018-19. This shift was partly due to a modest decline in the manufacturing sector's workforce. Unfortunately, this skewed pattern indicates that construction has overtaken manufacturing in labour absorption in recent years, a development with negative implications. In 2022-23, only 11.4 per cent of the workforce was engaged in manufacturing, limiting the potential expansion of private consumption, a pivotal segment of the economy.
However, the positive economic outlook is tempered when considering the growth rate dynamics between India and China. China's nominal GDP stands at $17.7 trillion, approximately five times that of India. Even with this baseline, China's contribution to the incremental addition of $104 trillion to global GDP is expected to surpass India's at current growth rates. Achieving an elevated growth trend from around 6.5 per cent to 8 per cent necessitates addressing structural challenges impeding economic momentum.
Despite significant policy initiatives aimed at attracting manufacturing to India, portraying this endeavour as a rosy picture is flawed. The reality is that high-margin and higher-value-added manufacturing has not gained significant traction in the country. Instead, there is a notable trend of assembling parts taking precedence. This shift raises concerns about the depth of India's industrialisation and its ability to foster industries that contribute substantially to economic value.
To fortify India's manufacturing landscape, there is an imperative need to address barriers hindering the establishment of high-value industries. It calls for strategic interventions to encourage research and development, skill enhancement, and innovation within the manufacturing sector. While progress has been made in certain areas, a more comprehensive approach is required to position India as a global hub for advanced and sophisticated manufacturing, ensuring sustained economic growth and competitiveness on the world stage.
On a parallel note, the harsher comparison is that India has evolved into a global technology handyman, proficient in providing diverse IT services. However, the challenge lies in the fact that we are not yet positioned as the go-to specialist for pioneering technology ideas or high-end consulting services.
While celebrating overall economic resilience is important, it is equally crucial to ensure that the benefits percolate down to micro-consumer segments. Economic growth should not merely be reflected in aggregate numbers but must be felt in the day-to-day lives of individuals. A truly robust economy is one that uplifts and empowers every stratum of society, fostering inclusive prosperity. Amidst technological disruptions that hold promise, questions arise about their inclusivity. While technology can bring positive changes, it's crucial to assess whether these benefits are accessible to all.
On the environmental front, climate change poses an imminent threat to humanity, with visible signs of destruction mounting daily. The urgency required in climate action appears limited, raising concerns about the long-term consequences. The financing of climate action further deepens the divide between the Global South and developed nations that have historically relied on fossil fuels to amass wealth and comfort. This raises a poignant question: when will humanity witness a more compassionate and empathetic global approach? Addressing these challenges demands collective efforts, international cooperation, and a reevaluation of priorities to ensure a more inclusive and humane world for future generations.
