- February 10, 2023
How India is staying ahead of its global peers amid the economic slowdown?
Global leaders are extremely bullish on India despite macroeconomic volatility. With foreign investors’ money pouring in, stock markets generating positive returns and companies setting up their manufacturing facilities in the country- Which magic spell did India cast on itself? Did China lose its sheen? How did India manage to capture global attention?
Once called the land of snake charmers and magicians, it is now emerging as the darling of the global investor community. Investors and global CEOs have been using words like- ‘Shining star’, ‘bullish’, and ‘strategic importance’ to describe the power of this emerging market economy, which is also giving stiff competition to developed countries like the UK, Germany and even China!
So, what made India race past its peers? Here are 5 driving factors, according to a news report in the Economic Times, which made India resilient and bounce back from the pandemic.
- Growth in exports and private consumption
Despite challenging circumstances, exports were robust and were growing at a rate of 23%. Not only this, even merchandise trade value has increased from USD 228.90 billion to USD 335.44 billion, which is a recordbreaking 46% jump! However, after a point, growth plateaued, and the rebound in domestic consumption had sufficiently matured to take forward the growth of India’s economy. Domestic private consumption remains buoyant in November 2022, as indicated by Motilal Oswal’s Economic Activity Index. The index estimates that private consumption grew at a five-month high pace of 5.6 per cent YoY, driven by auto sales and broad-based expansion of services.
- Capex – the driving force behind the numbers
A capex thrust in the last two budgets of the Government of India was not an isolated initiative meant only to address the infrastructure gaps in the country. It was part of a strategic package aimed at crowding-in private investment. Capex has nearly doubled in the last one year. Recently, the Government has also announced a 33% rise in capex plans going ahead. This is going to further bolster the economy.
- Tax buoyancy
The government has reported stellar tax collections both in direct and indirect taxes. Direct taxes have registered a YoY growth of 26 per cent from April to November 2022, enabled by corporate and personal income tax growth. This year the gross GST collections, taken together, were ₹13.40 lakh crore from April to December 2022. Thus, implying a YoY growth of 24.8 per cent.
- Strong and robust banking system
The banking system has been witnessing an upsurge in profits and diminishing non-performing assets (NPAs). Not only are private sector banks reporting stellar numbers, but even public sector banks are no less. Credit growth has surged to double digits, which is at a decadal high. This indicates that businesses have picked up and there is enough pent-up demand in the economy.
- Approximate government policies
The massive vaccination drive in India, brought people out to the streets to re-experience the “bazaar” as the marketplace was rapidly populated with service providers returning to resume business. Growth is inclusive when it creates jobs. Both official and unofficial sources confirm that employment levels have risen in the current financial year. The RBI kept hiking the interest rates, to a cumulative total of 225 bps which shows how the country has managed to tackle its inflationary pressure.