It is heartening to see that on the economy front, even optimistic expectations have been exceeded. In fact, last 9 years were not really the easy ones for the growth to sustain. We saw formidable challenges and headwinds such as Covid, Russia-Ukraine war, China-US standoff, inflation spike, interest rate and currency volatility, slowdown in developed economies and so on. India has sailed through these headwinds and emerged as a ‘power’ to reckon with.
The daily news headlines clutter with political, social, international issues and obscure the assessment of how the underlying economy is chugging along. In the last 9 years, India’s focus to build physical, financial, technological, digital and administrative capacity through a “reform, perform and transform” mantra is paying off.
As regards to physical and digital infrastructure, in the last 9 years, national highway length has nearly doubled to about 1,45,000 kms, broadband internet subscriber grew more than 15 times to over 85 crore and digital transactions were a staggering ₹149.5 lakh crore in 2022! Power generation capacity has more than doubled and, port and airport infrastructure has improved significantly.
For the nation’s ability to finance its growth, banks have best ever capital adequacy and profitability due to faster resolution of bad loans and consolidation of PSU banks, creating a few large banks. The buoyant capital markets have helped channelise domestic savings to productive use. Corporates have been able to reduce debt and fortify their balance sheets. Current account deficit has moderated and has shown tremendous resilience to external tremors. GST collection made a high of ₹1.87 lakh crore in April 23. The tax-to-GDP ratio continues to improve. FDI flows over the past decade at $600 billion was twice the same in the previous decade. The government spend has much higher share of capex and inflation is range bound (4-6%).
On ease of doing business ranking, India has moved up impressively from 147 to 63. A number of long overdue fundamental reforms like bankruptcy act (IBC), real estate regulation (RERA), PLI (Production Linked Incentives) and one nation one tax (GST), have been game changers.Many external developments, economic and geo-political, seem fortunate for India. For instance, for the first time, global MNCs and investors are looking seriously for alternative to China and many energy intensive industries in Europe, battered by disruptions in Russian gas supplies, are looking to geographically diversify and relocate. Favourable demographics coupled with better financial inclusion, a potential rise in share of manufacturing and the rapid growth in digital infrastructure are other big tailwinds. If government does not support with bold reforms, many a times, such fortunate opportunities are frittered away.
Over the next 5-10 years, India will still need to invest a lot more in social and urban infrastructure, further simplify tax laws, get consensus on farm laws to improve agricultural productivity, address the issue of state electricity boards losses etc. to fully capitalise on its growth potential.
While last 9 years have witnessed remarkable growth, the cumulative impact of a number of policy initiatives taken by the current government significantly enhanced capacity of the Indian economic juggernaut to sustainably grow at 7-8% per annum in the coming decade and be the third-largest economy in the world by 2030.
(Author is Founder, IIFL Group)