The 7.2% growth was no flash in the pan and reasons need to be understood by looking at all that has been done in the last nine years, and how India is positioned to be the largest growth contributor to the global economy. Getting there will be one part of the journey. The second will be to sustain it in the wake of global headwinds, oil prices, geopolitical uncertainties and vagaries of monsoon.
In the past decade, the state has boosted spending on infrastructure, ramped up on supply-side policy reforms, and further formalised the economy along with never before seen digital off-takes for transactions. All that has come together at a critical junction that makes India readier today than ever before for further growth.
The sentiment by international corporations is higher today for India than other Asian economic markets and foreign direct investment is seen as an important propeller in conjunction with state and private local capital.
Research reports point to the steady rise of manufacturing and capex as a percentage of GDP. Already there have been announcements by large corporations such as Apple and the Tata Group to partner on manufacturing facilities which will make phones.
As India and its youth population, which is the largest in the world, mature, discretionary consumption will also evolve. The consumption acceleration is expected to see Indian per capita income more than double from $2,200 currently to about $5,200 by 2032.Long-term projects like Gati Shakti which is a digital platform to bring together 16 ministries including railways and roadways for integrated planning and coordinated implementation of infrastructure connectivity projects will provide seamless connectivity for the movement of people, goods and services from one mode of transport to another. That means facilitating last-mile connectivity and slashing travel time and logistics costs.According to an economic report by Morgan Stanley, at a systemic level, the financial ecosystem is pegged to see stable inflation and shallower interest rate cycles. All of that is geared to feed into the saving-investment dynamics, driving gains for India’s external balance sheet, with a progressively narrower trend in the current account deficit (CAD). Triggered by supply-side reforms by the government, analysts and research houses point to a major rise in investments, a moderation in the CAD and an increase in credit-to-GDP to support growth for coming profit, the report says.
There’s more. The commerce and industry ministry said that India’s merchandise and services exports will cross $2 trillion by 2030 from the current level of $765 billion (which in itself was significant given global circumstances), on the back of a more dynamic foreign policy.
However, to build on this fast, and now, India needs to be crowding in private savings and private capex. How can that be achieved? For that we need further reform to the Insolvency and Bankruptcy Code, drive divestments of non-core assets, implement the National Monetisation Pipeline (NMP) quicker and bring laser-sharp focus on ease of doing business along with the states. All of this combined will attract much-needed FDI, not to mention local investments.
This government’s focused execution across long-term projects, the robustness of the financial system and tax collection plans like GST have made the country the largest GDP contributor in Asia. Sustaining it and working across progressive reforms will ensure India becomes one of the largest contributors across the world as well. Time to double down.
(The author is is founder-chairman of Sorin Investments, an early stage technology fund.)