Indian economy shrugs off global headwinds in 2023, hopes remain high for New Year

New Delhi: Retaining its title of fastest-growing major economy in the world, India stayed resilient to global headwinds in 2023 and is all set to continue the momentum in the coming quarters.

Strong domestic demand and massive public spending have helped the economy nullify some of the external challenges. At 7.6 per cent year-on-year growth, India's gross domestic product (GDP) outpaced all major economies in the world in July–September quarter (Q2) of 2023–24.

The central government's capex-led growth strategy to support the economy and attract investment from the private sector has been yielding the desired results.

Multilateral agencies such as the World Bank and the International Monetary Fund (IMF) have affirmed the government's policies and reform measures to propel the economy. While they have given their thumbs up to the growth strategy, the IMF, in a recent paper, red-flagged India's debt risks. The government has, however, disagreed with its conclusions.

The IMF recently said that in an extremely adverse scenario, India's general government debt (comprising both central and state government debt) could exceed 100% of GDP in the medium term.

"Among the various favourable and unfavourable scenarios given by the IMF, under one extreme possibility, like once-in-a-century COVID-19, it has been stated that the general government’s debt could be “100 per cent of debt to GDP ratio” under adverse shocks by FY2028. It talks only of a worst-case scenario and is not fait accompli," Union Finance Ministry said, dismissing the IMF findings.

Among key sectors of the economy, manufacturing has seen excitement from investors on the back of the production-linked incentive (PLI) scheme. As many as 746 applications have been approved till November 2023 under the PLI scheme.

The official data shows PLI units have been established in more than 150 districts (24 states).

"Over Rs 95,000 crore of investment was reported till September 2023, which has led to production and sales of Rs 7.80 lakh crore and employment generation (direct and indirect) of over 6.4 lakh. Exports have been boosted by Rs 3.20 lakh crore. Incentives worth around Rs 2,900 crore have been disbursed in FY 2022–23," the Ministry of Commerce & Industry said in a media statement.

Start-up ecosystem also gained strength in 2023. More than 1.14 lakh startups have been recognised by the government so far. These start-ups have together created more than 12 lakh jobs, with an average of 11 jobs created by each recognised startup.

On various metrics, the Indian economy has shown signs of visible change. The massive digitisation of the economy and the building of physical infrastructure have resulted in lowering of logistics costs, a key requirement for becoming a global production hub.

A report from the National Council of Applied Economic Research (NCAER) released this month said India's logistics costs fell in the range of 7.8%–8.9% of GDP for 2021–22.

"India will likely retain the coveted position of growing at the fastest pace amongst the major economies in 2024 on the back of strong consumer demand, leading to a pickup in investment across several sectors in construction, hospitality, infrastructure, including railways, and aviation," industry body Assocham said in its year-end note on the Indian economy. (UNI)