Prospects and Challenges greet the World’s fastest-growing economy
Tribute to a Great Nation on its 68th Republic Day
Venkat Raman
Auckland, January 26, 2018
The annual review of the Indian economy by International Monetary Fund could not have been better timed.
Just as India’s Prime Minister Narendra Modi was arriving in Zurich to attend the annual World Economic Forum (he was the first Prime Minister of India to do so in 20 years) held in Davos, Switzerland from January 23 (concluding today), the IMF gave a tick to the Indian economy, saying that it remains a ‘bright spot’ on the global landscape with strong growth.
Consolidated growth
The IMF Report, released in Davos, said that the drop in the price of oil in the global market in late 2014 boosted economic activity in India, further improving its external current account and fiscal positions and lowering inflation levels.
“In addition, continued fiscal consolidation, by reducing government deficits and debt accumulation, and an anti-inflationary monetary policy stance have helped cement macroeconomic stability,” the Report said.
One of the most significant characteristics of India, its people and its economy is the inimitable resilience and penchant for progress, despite serious challenges and problems that confront the Nation on several fronts.
Some challenges
Confounding politics at regional and state levels, persisting poverty among the lower income groups (about 270 million according to World Bank estimates in 2012), unemployment, perceived corruption still persisting at some levels, and threat of terrorist attacks are among the challenges that India faces in its move to becoming the power engine of the world.
A key concern for IMF is the health of the Indian banking system, which is still dealing with a large amount of bad loans, and also heightened corporate vulnerabilities in several key sectors of the economy.
None of these however can cloud the fact that India is on the threshold of a major change, with the potential to overtake all other economies of the world not only in economic growth but also in many other areas. With its youthful population (more than 50% of Indians are below the age of 25 and more than 65% are below the age of 35), the country is set to become the human capital of the world.
Impressive Reforms
The Modi government, since assuming office in May 2014, has heralded major changes in public and economic administration and as IMF observed, “and has made significant progress on important economic reforms, which will support strong and sustainable growth going forward. In particular, implementation of the Goods and Services tax, which has been in the making for over a decade, will help raise India’s medium-term growth to above 8% as it will enhance the efficiency of production and movement of goods and services across Indian states.”
Bullish outlook
Mr Modi has been the architect of several innovative initiatives, the most important of which is the ‘Make in India’ Programme (launched in 2015), which welcomes global investors and manufacturers to establish their presence in the world’s largest consumer and export markets. The Programme, supported by his international diplomacy and state visits to rich and economically advanced countries, has resulted in increased Foreign Direct Investment (FDI) and other benefits.
The country’s economic performance over the past four years has encouraged Mr Modi to declare at the opening address to the delegates attending the World Economic Forum on January 23, 2018 that the Indian economy will double in size over the next seven years.
It was a self-assigned target, but economists agree that it is not unachievable.
Financial Times of London reported that most political leaders who appear at the elite gathering in Switzerland act as salesman-in-chief for their countries, and India’s Prime Minister did not disappoint.
“Boasting to the assembled multinational executives and financiers that his country was ‘removing red tape and laying out the red carpet’ for investors, Mr Modi claimed that India would have a $5 trillion economy by 2025.”
“Investing in India, travelling to India, manufacturing in India has become much easier than before,” Mr Modi said.
Data released by the International Monetary Fund in Davos suggest the Indian economy will grow 7.4% in 2018, which would put it roughly on track to meet Mr Modi’s target.
In his address, Mr Modi spoke of three types of fractures- fracture within a nation, fracture at the international level and fracture between the present and the future.
“Since generations, we have believed that all resources and all wealth belong to Nature and the Almighty. We all, including Presidents, Prime Ministers, Kings and Queens are just the trustees or managers of this wealth. The biggest recent advocate of this trusteeship philosophy was Mahatma Gandhi.
“He used to say that there is enough in Nature for your Need; but not for your Greed;
Due to this belief, we have learnt to live in a way that is conducive to existence of man vis-a- vis man as well as Nature; which is conducive to the needs of today as well as next generations,” he said.
Growing optimism
Almost seven decades of political and economic independence punctuated by periods of boom and gloom have helped the equilibrium of the India’s teeming millions and today there is a growing sense of optimism. With the economy performing well above the global average and with almost every industry on its progressive path, there is cause for celebration.
As Indians mark the 68th Republic Day with gaiety in India, New Zealand and elsewhere in the world, multinationals and international investors continue to eye the country to make their own presence felt in the land of culture and talent.
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Photo Caption:
Narendra Modi speaking at the World Economic Forum, Davos, Switzerland on January 23, 2018. Picture Courtesy: NDTV
