New Delhi, October 12: A recent report from Barclays suggests that India has emerged as a bright spot in the global economy and with an 8% growth rate will match China as a top contributor to global GDP by the year 2028.
The report highlights that India’s growth has outperformed the rest of the world, achieving robust expansion with relatively low inflation, and is set to attain at least 6 percent GDP growth while maintaining macroeconomic stability.
In order for India to surpass China as the biggest driver of global economic growth, it would need to target an ambitious 8 percent GDP growth rate.
One key question raised in the report is whether Indian authorities can encourage faster growth without compromising the hard-won macroeconomic stability that has characterized India’s economic ambitions, particularly in the context of the Ukraine-Russia conflict.
Despite global economic turbulence, India has stood out as a resilient economic hotspot in the past two years. The report suggests that India is well-positioned to be the fastest-growing major economy in the medium term, given the expected weakness in global growth through 2023-2024.
Notably, India’s investment climate has witnessed a remarkable turnaround. Just a decade ago, India was among the ‘Fragile Five’ economies grappling with significant macroeconomic instability, including heavy debt burdens, an unstable financial sector, and a weak fiscal profile.
However, it has managed to reverse this situation, with the report underlining the significance of India’s investment appeal.
While India’s economic growth has slowed in 2023, it continues to outpace its global counterparts while maintaining macroeconomic stability. The Indian government’s focus on managing inflation and the country’s investment turnaround have been critical factors in this resilience.
To achieve the desired 8 percent GDP growth, the report suggests that the Indian government needs to implement various economic prerequisites, including increasing the nominal savings rate and fostering incremental growth in the workforce.
Encouraging female participation, expanding the global export share, and making productive use of capital are considered essential elements in this endeavor.
The report also emphasizes the significance of the investment cycle in driving India’s economic growth. Traditional sectors, such as telecommunications and digitization, have seen significant investments in recent years. However, capacity constraints in these areas underscore the need for greater investment in traditional sectors.
The report recommends increased public investment to drive structural shifts in overall investment and push the GDP growth rate closer to 8 percent.
Furthermore, the International Monetary Fund (IMF) has raised its GDP growth forecast for India in 2023, aligning it closely with the predictions of Indian authorities. India’s GDP is expected to grow by 6.3 percent in 2023, reflecting stronger-than-expected consumption in the first half of the year.
Despite these positive economic outlooks, there are concerns regarding private consumption, particularly on discretionary items. Industrial production data reveals a year-on-year decline in the output of consumer durable goods, underscoring some challenges in the domestic economy.
On a global scale, the IMF has retained its forecast for 2023 at 3.0 percent, with a slight reduction to 2.9 percent for 2024. It warns of “widening growth divergences,” with the strongest recovery observed in the United States, while China grapples with the aftermath of the pandemic-related slowdown and a property sector crisis.
Other emerging markets and developing economies, particularly low-income countries, face even weaker recoveries.
India’s economic growth trajectory presents significant opportunities and challenges. Achieving the 8 percent GDP growth target will require concerted efforts and strategic investments. As India continues to rise as a major global economic player, it will have a notable impact on the world economy, particularly in the context of global growth projections.
