India surges ahead

India's performance, in a global context over the last three-year difficult period, gives a more realistic picture. Among all the major economies, India's growth at 3.83 per cent is the highest.

Outbreak of Covid and ongoing Russian-Ukraine conflict have thrown almost all major economies of the world in a tailspin. However, defying prophets of doom, the Indian economy is surging ahead, and has emerged, one of the fastest growing in the world.

According to National Statistical Office (NSO), the country's GDP rose by 13.5 per cent in the April-June quarter of the current fiscal year, higher than the 4.1 per cent in the previous quarter. It's at a time when most of the major economies of the world are either stagnant or declining and facing a dismal spectre of a looming recession.

Statistics have limitations. They are incapable of telling the full story and can't convey the essence of a phenomenon in all its dimensions. Growing GDP numbers don't necessarily mean just distribution of prosperity and incremental wealth produced by an economy. India, however, has done well on this score as well. According to International Monetary Fund (IMF), the country has nearly got rid of abject poverty, by pulling out millions from morasses of hunger and misery in the last few years.

India's economic performance, seen in a global context over the last three-year difficult period, (2019 to 2022 for the April-June quarter), gives us a more realistic picture. Among all major economies, India's growth at 3.83 per cent in this crucial period is the highest followed by the US 3.78 per cent, Canada 2.58 per cent, the UK 1.06 per cent, France 0.68 per cent, Italy 0.21 per cent, Germany 0.11 per cent and Japan -1.27 per cent.

The country has also emerged as the fifth largest economy in terms of nominal GDP, leaving behind the United Kingdom. According to State Bank of India, India had surpassed the UK "as early as December 2021 itself" and it is set to become the third largest economy by 2029. India is now behind the US, China, Japan and Germany.

In 2014, the size of Indian economy was $2 trillion and ranked 10th in the International Monetary Fund (IMF) list. During the last eventful eight years, India has overtaken Russia, Italy, Brazil and France, and surpassed Britain. The present size of Indian economy is put at $3.2 trillion, projected to cross $ 5 trillion in 2026!

All available projections indicate that Indian economy will continue with this uptrend in foreseeable future. Consumption, investment and exports - the three key components of the economy - have all registered impressive growth at about 26 per cent, 20 per cent and 15 per cent respectively over the last year.

The unemployment rate for persons aged 15 years and above in urban areas dropped to 7.6 per cent during April-June 2022 against 12.6 per cent a year ago. Passenger vehicle dispatches from factories to showrooms in August at 329,000 units was the highest ever for the month. For the first time ever, the industry has sold close to a million units cumulatively in three months!

The country is also the world's leading consumer of mobile data, and ranks second in terms of internet users. India has emerged as the third largest consumer of energy as well. Direct tax collection, including personal income tax, rose by 35.46 per cent to Rs. 6.48 lakh crore in the current fiscal up to September 8, reflecting an uptick in the economy.

In March 2020, India has around 40.9 million Demat accounts. During the last 30 months, number of Demat accounts have multiplied, and now stands at 100 million! Every month new aspiring investors are investing in stocks and other financial instruments, underlining India's growing prosperity and risk taking capabilities of its citizens.

The ecosystem is saturated with optimism and self-confidence. In 2022 alone, 20 start-ups have joined the unicorn club, taking India's total unicorn count to around 106, valued at over $300 billion. India recognises around 80 start-ups each day, highest per day rate in the world. In 2014, India had 6.5 crore broadband subscribers: today, there are 78 crore!

India's recent spurt in agricultural exports is a pleasant surprise. The farm exports increased to $41.90 billion during the pandemic year, and galloped to $50.27 billion, this year. The bulk of the jump in exports is in commodities like rice, wheat and sugar. India's wheat exports jumped to 7 million tonnes in 2021-22, largely on account of Russia-Ukraine war.

While the Indian economy is on ascend, a nervous Europe anxiously waits for a cold and dark winter. The other day, gas prices jumped 30 per cent. This has come on the heels of an increase of 400 per cent over the last year. Recently Russia shut Nord Stream - a 1200 km pipeline under Baltic Sea that transports Russian gas to Germany indefinitely, ostensibly for maintenance.

The American economy too is not all that healthy. The US Government debt to GDP was 103 per cent in June 2019. A year later it was 136 per cent. European Union, however, has managed to bring down its debt to GDP ratio from 92 per cent in March 2021 to 88 per cent a year later. But can it continue to maintain the debt to GDP ratio at this level in view of the energy shock and the recession waiting round the corner?

Britain had a debt to GDP ratio of 99.6 per cent in March and things may change for the worse because of impending economic contraction forecast by the Bank of England in the coming months. The country is in the grip of a serious cost of living crisis, with inflation crossing 10 per cent. During the last one year, food prices have appreciated by a whopping 18 per cent and energy costs are galloping at an unprecedented speed.

China too is in economic mess. Its real estate sector is in shambles and GDP growth rate figure for the first quarter is down to 0.4 per cent. With the economy limping and growth rate taking a nose-dive, Yuan has lost much of its sheen, dropped to a two-year low and appears to be heading for further depreciation. According to Goldman Sachs, a setback to Chinese currency would have ripple effect, going as far as Africa and Latin America.

However, India can't remain immune from global economic developments beyond a certain level. Foreign exchange reserves plunged by nearly $21 billion to $553.1 in five consecutive weeks between July 29 and September 2, according to RBI.

The current account deficit is widening. The rise in imports at 37.2 per cent year on year and 30.3 per cent over a three-year period need to be seen in the proper context. Oil imports contribute about a quarter of India's import and oil imports have almost doubled over the last year. The increase in the oil import bill itself contributes about two-thirds of the 37 per cent increase in imports over the last year. It is exogenous and, therefore, cannot be controlled.

Meanwhile global corporate honchos too are acknowledging India's astounding economic rise. Speaking to media, Bob Sternfels, CEO, McKinsey & Co said that "it will not only be India's decade, but India's century". Microsoft president and vice-Chairman Brad Smith recently told an Indian newspaper that India is now poised to join the ranks of the top 2-3 software economies in the world. India has become a "software superpower", he added.

How did India succeed, while most of the world failed when faced with Covid and fall out of Russia-Ukraine war? India was wise, didn't fall for an easy option, of running up a high fiscal deficit, despite pressure to imitate the West's overgenerous stimulus packages.

A yet another important reason was India's focus on Ease of Doing Business. The country introduced policies aimed at promoting entrepreneurial potential by providing incentives and introducing regulatory reforms wherever needed.

(Mr. Balbir Punj is a Former Member of Parliament and a Columnist. He can be reached at: [email protected])

Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of OneIndia and OneIndia does not assume any responsibility or liability for the same.