Financial projections show that India’s economy is expanding at the fastest rate among major nations, putting it on track to overtake China by the end of this decade as the third-largest economy in the world.
The New York-based financial firms Morgan Stanley and S&P Global forecast that India’s economy will maintain its strong speed, allowing it to surpass Japan and Germany and claim the title of third-largest economy in the world.
The world’s two biggest economies at the moment are the United States and China.
Insights from Minister of Commerce & Industry Shri Piyush Goyal
Union Commerce Minister Piyush Goyal expressed confidence that India will become the world’s third largest economy in the next four to five years and could reach a $35-40 trillion economy by 2047.
He praised India’s strong macroeconomic fundamentals and recent reforms and encouraged the industry to take pride in their achievements. Goyal also highlighted India’s young demographic as a major asset.
He criticized the RCEP Agreement, stating that it would have been detrimental to Indian manufacturing and that the government’s decision to offer to become a part of it was ill-conceived. Additionally, Goyal argued that India has hurt its own interests by becoming accustomed to low-cost substandard goods from China.
Goyal also mentioned that the Russia-Ukraine conflict has had a significant impact on both developed and developing countries, particularly in regards to food and energy security and inflation, interest rates, and growth.
Piyush Goyal highlighted the significant trade deficit that India has had with China, which increased to $48 billion by 2014 from less than $2 billion around 15-16 years ago. He criticized China’s practice of preventing Indian products from entering its market while allowing Chinese products to flood the Indian market.
Goyal praised Prime Minister Narendra Modi’s decision to not join the RCEP Agreement in November 2019, which was celebrated by various sections of Indian industry and business, farmers, and those involved in the dairy sector. Goyal emphasized the importance of creating adequate manufacturing systems and sensitizing the Indian people and businesses to take more pride in Indian products, as India believes in the rule of law, liberty, and freedom of expression.
He also acknowledged the coexistence of different economic philosophies in Asia and the need to move away from the use of low-cost, low-quality goods from China.
India’s Emergence as a Trustworthy Partner Amid COVID-19 Crisis
Piyush Goyal, the Indian Minister of Commerce and Industry, stated that India has become a trusted global partner due to its ability to convert the COVID-19 crisis into an opportunity.
The country’s innovative approach to developing and distributing vaccines at a low cost has been a world record, and it has not let down a single international commitment during the pandemic.
India is now a reliable trading partner, and it has completed several Free Trade Agreements with various countries, including the fastest ever FTA in the history of the world with the UAE.
Goyal emphasized the need for the Indian auto industry to be 100% indigenized and strengthen domestic manufacturing capabilities to stand on its own feet.
He urged big companies to consider paying MSMEs promptly to increase small businesses’ profitability.
The Indian government is promoting circular economies to recycle waste, sustainable textiles, and organic farming, and has focused on addressing climate change as a responsible global citizen, making India one of the top five performing nations in achieving climate change goals.
The minister explained that FTA approval in the US requires the approval of the US Congress, and there is no bipartisan support on this issue. As an alternative, the Indo Pacific Economic Framework has been conceptualized to get closer to the US in terms of resilient supply chains, technology partnerships and opening the economy through indirect measures.
The government is investing time and capital in strengthening the India-US partnership, as demonstrated by a visit from a huge business delegation comprising top US corporations and the US Commerce Secretary.
The minister acknowledged that efforts to increase exports will have an impact on MSMEs, but the government is giving concessions to MSMEs, startups, and women entrepreneurs. He also emphasized that the government has undertaken game-changing reforms to empower the people, and the aspiration of the young population in India for a better life will drive the Indian economy towards becoming a 47 trillion dollar economy by 2047.
The Facts about Indian Economy from The Economic Survey 2022-23
In 2023–2024, India’s GDP is projected to expand by 6% to 6.8%, depending on the direction of global economic and political developments.
Positive factors that contribute to the upbeat growth predictions include the recovery of private consumption, which has boosted production activity, higher capital expenditure (Capex), nearly universal vaccination coverage that allows people to spend money on contact-based services like restaurants, hotels, shopping centres, and theatres, as well as the return of migrant workers to cities to work on construction sites, which has significantly reduced housing market inventory, the strengthening of the U.S. dollar, and the strengthening of the global economy.
The Economic Survey 2022–23, presented in Parliament by Smt. Nirmala Sitharaman, Union Minister for Finance & Corporate Affairs, forecasts a nominal GDP growth of 6.5% in real terms in FY24. The prognosis is roughly equivalent to the projections made by locally and by international organisations like the RBI and the World Bank, IMF, and ADB.
According to the report, India’s capital investment cycle is anticipated to begin in FY24 as a result of a robust loan disbursal and the improvement of the business and banking sectors’ balance sheets. The development of open-source digital infrastructure and ground-breaking initiatives like PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive programmes to increase industrial output will all contribute to economic growth.
Despite the three shocks of COVID-19, the Russian-Ukrainian conflict, and Central Banks around the world responding with synchronised policy rate hikes to curb inflation, leading to an appreciation of the US Dollar and the widening of Current Account Deficits (CAD) in net importing economies, agencies around the world continue to project India as the fastest-growing major economy at 6.5-7.0% in FY23.
As seen by the lowering urban unemployment rate and the quicker net registration in Employee Provident Fund, private consumption and capital creation, which were primarily responsible for India’s economic development in FY23, helped create jobs. Additionally, the world’s second-largest vaccination campaign, which involved more than 2 billion doses, helped to improve consumer attitudes, which may extend the spending upswing. However, private capex must soon assume the driving force if job creation is to move forward quickly.
As a result, supply chains have continued to be normalised. It also highlights the fact that the positive growth outlook for India is due to (i) limited health and economic consequences for the rest of the world from the current spike in Covid-19 infections in China; (ii) inflationary impulses from the reopening of China’s economy turning out to be neither significant nor persistent; and (iii) recessionary tendencies in major Advanced Economies (AEs) causing a cessation of monetary
According to the survey, the extended Emergency loan Linked Guarantee Scheme (ECLGS) of the Union government has enabled loan growth for the Micro, Small, and Medium Enterprises (MSME) sector to be extraordinarily high, above 30.6 percent, on average, between Jan.-Nov. 2022. As seen by the quantities of Goods and Services Tax (GST) they pay, the recovery of MSMEs is moving along quickly, and the Emergency Credit Linked Guarantee Scheme (ECGLS) is alleviating their anxieties about debt payment.
In addition to this, the movement in borrower financing preferences away from risky bond markets, where rates have grown, and external commercial borrowings, where interest and hedging costs have increased, towards banks has had an impact on the growth in overall bank credit. Credit growth is projected to be brisk in FY24 if both inflation and the actual cost of credit drop in that year.
Another growth engine of the Indian economy this year was the federal government’s Capital Expenditure (Capex), which rose by 63.4% in the first eight months of FY23 and has since surpassed private Capex since the January-March 2022 quarter. The budget for capital expenditures for the entire year looks to be achievable based on the present trend. With the improvement of the corporate balance sheets and the subsequent rise in credit financing it has been able to produce, a sustained increase in private Capex is likewise inevitable.
The Survey emphasises that vaccines have made it easier for migrant workers to return to cities to work on building sites as the recovery in consumption spilled over into the housing market while focusing on the pause in construction operations during the Pandemic.
This is demonstrated by the housing market’s inventory overhang, which fell significantly from 42 months in Q3 of FY22 to 33 months in Q3 of FY23.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), according to the article, has been directly producing jobs in rural regions and indirectly giving rural people the chance to diversify their sources of income. Programmes like PM-Kisan and PM Garib Kalyan Yojana have contributed to guaranteeing food security in the nation, and the World Bank has praised their effectiveness.
The Survey observes with confidence that the Indian economy seems to have recovered from the pandemic, putting on a complete recovery in FY22 before many other countries, and positioned itself to return to the pre-pandemic growth path in FY23.
However, India has also had to deal with the inflation-control dilemma this year, which was made more difficult by the conflict in Europe. Retail inflation would ultimately fall below the RBI upper tolerance goal in November 2022 thanks to steps made by the government and RBI as well as a decline in the price of commodities globally. The Survey observes with hope that the Indian economy appears to have recovered from the epidemic and is now positioned to rise, staging a full recovery in FY22 before many other countries
Effects of De-dollarisation
De-dollarization can be seen as another reason for the growth of the Indian economy.”
In March 2023, the United States experienced a severe economic downturn, with a series of major bank failures. Among these was the Silicon Valley Bank, a top-20 bank in the country with more than $215 billion in assets, which suffered a loss of $1.8 billion due to increased interest rates on US Treasury securities.
Shortly thereafter, the New York-based Signature Bank, with over $110 billion in assets, collapsed due to exceeding the maximum deposit limits set by the US Federal Deposit Insurance Corporation.
The stock price of First Republic Bank, with over $215 billion in assets, also plummeted by 67%, and Western Alliance Bancorporation’s share price fell by a staggering 90%.
Moreover, nearly all of the leading private banks in the US saw their credit ratings downgraded. The common thread in all of these bank failures was the impact of rising interest rates on US Treasury bonds. These developments have raised concerns about a potential economic doomsday scenario for the US, given the scale and speed of the bank collapses.
As the demand for the US Dollar is decreasing in the world, these bonds are also falling, and in order to make them float, banks have no solution but to offer higher interest rates, which burn holes in their liquidity. And when Renowned economist Dr. Nouriel Roubini, also known as ‘Dr. Doom,’ who predicted the global recession of 2008 with utmost accuracy, is not only predicting another global economic collapse but also cautioning that this time, problems are going to last long, maybe a decade or more. One of the main reasons for this upcoming recession would be de-dollarization
The Tsunami of inflation and The “BRICS”
As the world moves away from the U.S. dollar as a world reserve asset, dollars will be dumped globally, causing a “tsunami of inflation” in the United States.
Interest rates will rise accordingly, followed by a “collapse” in asset prices, which would be used to usher in Central Bank Digital Currencies (CBDCs) and The Great Reset.
This dire scenario is the forecast of Andy Schectman, President and Owner of Miles Franklin and an expert on monetary and economic history.
Schectman, who has three decades of experience in the precious metals sector, said that the BRICS (Brazil, Russia, India, China, and South Africa) coalition could lead the charge to develop their own reserve currency which would compete against the U.S. dollar.
The BRICS are meeting in Durban, South Africa in August, and one of their agenda items is the development of an alternative to the U.S. dollar.