India’s economy is firmly out of the throes of the pandemic, last year’s higher-than-expected 7.2% GDP growth may actually be an ‘underestimation’, and the country is now set for a decade, if not more, of an uninterrupted 6.5% -7% increase, even if no further improvements are made. The Chief Economic Advisor (CEA) V. Ananth Nageswaran’s forecast about the state of the economy, briefed industry leaders last week. He asserted that India can now grow for longer periods of seven to 15 years, as China did between 1979 and 2008 “without running into the problems of overheating”, as it has in recent decades for three years. After four years of strong growth. Among the reasons for their optimism are strong momentum, better macro fundamentals with a reduction in inflation and trade deficit in recent months, and cleaner bank and corporate balance sheets, bolstered by reforms such as the Goods and Services Tax (GST) and digitisation, which have been formalized are promoting. The CEA’s detailed commentary on the bright prospects of the economy could be seen as a fresh official signal to the private sector to stop worrying and restart investment. Also, his comment that the economy may be on ‘auto-pilot’ mode may be an indication that there is little appetite, at least Till 2024 Lok Sabha elections.
With sectors like steel and cement seeing higher potential in action, sections of the industry may soon start loosening purse strings but a broad-based revival may take longer and to strengthen confidence-building and More action is needed. It is good that India has now recovered from the hit of COVID-19 on the economy marked by 5.8% GDP contraction in 2020-21. But reverting to the pre-pandemic trajectory is not enough – remember that growth had already gone down for seven consecutive quarters before the pandemic lockdowns. The economy grew only 3.9% in 2019-20, down from 6.5% a year earlier, and the quality of the recovery so far remains uneven. Unless private investment recovers strongly and job creation for lakhs of youth picks up, the growth in demand will not be enough to sustain the virtuous cycle on which the government is betting. If India wants to capitalize on the world’s China-plus-one supply chain discovery, intent is often not matched by actions. Misdemeanors like high import duty and complex ‘angel tax’ on inbound investment, even failing to fix an online service to register a new company, do not instill confidence in investors. Before the economic engine can truly kick into ‘auto pilot’ mode, the government must avoid unnecessary tinkering with its calibration and create conditions conducive to a smooth and swift, barrier-free passage of value and job creators should do.