Pragmatic initiatives are keeping India on the growth trajectory

Both Central and state governments are focused on Capex spending, which has a multiplier impact and all public sector organisations together at 4.5% of GDP on physical infrastructure like roads, railways, ports and airports by innovative schemes like Bharartmala, Sagamala and UDAN have kept India's wheel of growth higher

The Department of Economic Affairs of Ministry of Finance recently released a paper titled ‘Indian Economy: A Review - January 2024’.

It is customary to release the survey each year a day prior to the presentation of the Union Budget. However, since the Finance Minister has only presented an Interim Budget for 2024-25, the Economic Survey will be presented in July when the full Budget is presented by the next government at the Centre.

This review has been used to give an account of the performance of the Indian economy compared to the ones presented from 1950 to 2014 and the lessons learnt from the growth experience. By all accounts, 2014-2024 has been a decade of transformative growth.

There is a separate chapter "What made the Indian Economy Resilient". The focus on ‘Human Resources: Dovetailing Growth with Capacitating Welfare’ lists out the new approach to welfare, women-led development and skill development and Entrepreneurship. The strength of the country’s External sector is also covered in the report, which also dovetails the government’s efforts to take action under towards building resilience vis-à-vis climate. There is a chapter giving a brief sketch of the outlook for the economy in the coming years.

Post-pandemic, it had a substantial recovery in 2021 with 9.05 % GDP growth with an increase of 14.88% as against the negative growth of 5.83% GDP in 2020 due to Covid-19, which is negative of 9 70% over the earlier period.

In fact, the GDP came down in 2019 by 2.58% over 2018, which stood at 6.45% which is again 0.34% over 2017 at 6.80%. In 2014, 2015 and 2016, India had a GDP growth of 7 41%, 8.0% and 8.26%, respectively.

Compared to this period growth, India has to catch up further substantial growth in the near future that is once the global growth comes to normal after the current challenges ease. India had a lower GDP growth of 3.09% in 2008, which is 4.57% lower than earlier year 2007 growth of 7.66%. This is due to global financial crises but India recovered to 7.86% in 2009, an increase of 4.78%. It fared well in 2010 at 8.50%. However, the GDP growth suffered with low growth of 5.24%, 5.46% and 6.39% in 2011, 2012 and 2013, respectively.

India achieved the status of fastest growing economy in 2023-24 and is currently the fifth largest economy. It is the endeavour of the government to continue to register higher growth with further structural reforms and giving momentum to all drivers of economy with continuing focus on agriculture and allied activities, improvement of manufacturing sector's contribution to GDP by PLI scheme, Start of India, adoption of latest technology in manufacturing, inviting MNCs to put up manufacturing units and consolidating its supremacy in services, particularly exports. Both Central and state governments are focused on Capex spending, which has a multiplier impact and all public sector organisations together at 4.5% of GDP on physical infrastructure like roads, railways, ports and airports by innovative schemes like Bharartmala, Sagamala and UDAN have kept India's wheel of growth higher. This has also led to green shoots in private investment, which needs to be enhanced in capacity expansion and green energy. The PPI mode is envisaged in national infrastructure pipeline projects having more than 9,288 projects with a total outlay of Rs. 108.88 trillion between 2020 and 2025.

The notable areas that have helped India are use of technology and digital platforms. Digital public infrastructure and India stack has enabled in financial inclusion, ease of doing business, reducing cost of transaction, easy access to markets and an improved tax collection. India could showcase this to G20 countries, while there are bilateral agreements to promote in such countries. The progress in JanDhan accounts is a great example in inclusive growth. This has also facilitated DBT transfers without any leakage.

These initiatives have kept India on the growth trajectory. While elsewhere, given the various challenges the other nations are suffering in terms of growth, India is growing above 7% in 2023-24 and it is expected the same tempo will keep India's GDP growth in the range of 6.5% to 6.7% or may be again at 7% for 2024-25.

The Chief Economic Adviser remarks "it is one thing for India to grow at 8-9 % when the world economy is growing at 4%, but it is another thing to grow at or above 7% when the world economy is struggling to grow at 2%" However India has the potential to grow much higher and with the current resilience of Indian Economy, our PM vision of Vikasit Bharat could be materialised in the India's Amrit Kaal and India should become developed country by 2047”.

With prudent fiscal policies, India has kept its fiscal deficit under manageable levels and the Interim Budget has lessened the fiscal deficit at 5.8% for 2023-24 and for 2024-25 the projected fiscal deficit is at 5.1%. This reiterates the commitment to bring it down to 4.5% by 2025-26.

The focus on enhanced tax compliance and both direct and indirect taxes showing growth and controlling expenditure and directing more of capex led growth all are indicators to reach the desired level of fiscal deficit. By indicating lesser borrowings than last year is again positive for markets and should give scope for private sector borrowings and may also enable RBI to aim for reducing repo rate in the next first quarter. The financial strength of the banking system should enable them to provide credit support adequately for expansion and for productive sectors of the economy.

(The author is former Chairman & Managing Director of Indian Overseas Bank)