Deepak Parekh and a case for optimism on India’s economic future

As the government also likes to say, in five, six, seven or eight years the size of the economy can reach $ 7.5 trillion, but this is not the main thing here. The point is that India’s economy excites observers; There is no reduction in the interest level. This contrasts with the unanimously grim outlook for advanced countries such as the US and UK, which may not be able to avoid economic difficulties and pain from macroeconomic and geopolitical dynamics, as well as erosion of confidence in economies It is possible Like China and Turkey – as they did until recently. When was the last time the interest rate in the US economy was 5%? How will the Chinese economy deal with Beijing’s bizarre and authoritarian Covid protocols and the trade onslaught of the Biden administration?

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Despite all the changes happening around, the promise of India remains intact, which is definitely both a good and a bad thing. Good because it shows confidence in the economy’s ability and resilience to remain unaffected by multiple challenges – both legacy constraints such as weak capacities for policy formulation and implementation and new shocks such as Covid and changing geopolitics. bad because it can lead to complacency – like mint snap view is highlighted ().

What is needed is to strike the right balance between optimism and bleak projections. Yes, India was slowing down even before the outbreak of Covid. The wound of the pandemic was further compounded by the complications. The war in Europe isn’t helping. Most importantly, the cumulative record of successive governments remains largely unaffected by abysmal policy decisions that stagger the economy. Inflation will be a challenge for a few more quarters. The challenge of unemployment remains serious. And yet, the overall business mood is not as bleak as the noisy public narrative suggests.

What’s the point of optimism?

The aspiration used to be 9-10 per cent gross domestic product (GDP) growth. Even the most optimistic have now given up on that hope. But 6.5 to 7 per cent GDP growth, if sustained over the years, would no longer be considered disappointing given the changed global context. Because it shows the inherent resilience of the economy in the midst of global economic turmoil. Remember, growth, unless accompanied by a sharp deepening of inequalities, tends to reduce poverty and grow the middle class. The pace of this change can be slow or fast depending on the quality of development, which is why it is important to ensure the right kind of policies are in place to accelerate the pace.

Parekh said the source of his optimism is the expected growth in India’s middle class – a fivefold increase from the current 5 million to 25 million by 2031 – with an expected increase in per capita income from $2,300 to $5,200. They are right to feel about Gati Shakti, with policies encouraging start-ups, the roll-out of 5G services, and a national plan for infrastructure projects.

Also progress has been made in digitization and financial inclusion. Indians, who are not very financially literate, are still taking digital payments, leaving behind the Chinese and even some developed countries, some mint snap view Hinted.

This structural shift will reduce costs, and broaden and deepen linkages in the economy, resulting in increased efficiency and productivity, opening up new business and livelihood opportunities. Also, the use of digital payments is shifting business and trade away from cash, creating trails, improving traceability by tax collectors. The impact on tax collection has started showing mint snap view Argued. Thus, providing necessary government funds for development and growth promoting expenditure items.

Again, the global shift in consumption patterns is opening up opportunities India is well placed to take advantage of, provided the manufacturing and trade policies are right. Like electric vehicles segment. led by Tata Passenger Electric Mobility, a subsidiary of Tata Motors, which has been determined 15,000 crore over the next three years, Suzuki Motor Corp ( 10,445 crore by 2026) and Hyundai Motor India ( 4,000 crore by 2028), car manufacturers and accessory suppliers have cumulatively announced investments 70,630 crores over the next five years.

Finally, India benefits from shifting geopolitics and increased risk to global supply chains, particularly from their monopoly by China. India wants to attract companies moving away from China, including high-end manufacturing but especially labor-intensive, low-skill manufacturing, as a way to address the chronic problem of underemployment of workers in India. If policy making gets strengthened, and policy uncertainty and volatility subsides, the India story may bounce back. Indeed, showcasing some of it would be the best way to end the over-pessimism currently in the narrative.

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