INDIA 2023 :PERSPECTIVES

 It has been observed by demographers that in 2023 India will be replacing China as the largest populated country in the world with demographic dividend of high proportion of working age population if productively and efficiently utilized can create miraculous growth in the economy and vice-versa. Recently India became the world's fifth largest economy after over taking the  United Kingdom (UK). USA, China, Japan and Germany are larger than India  in terms of national income or GDP now. With  a real GDP growth of 6-6.5% in an uncertain world  India is set to be the third largest economy by 2029.While India has 1.41 billion people as against UK only .685 billion and obviously resulting in low percapita income whereas in UK it is higher than that of  India.India's GDP  growth trend showed that it was 8.26% in 2016, 6.80 % in 2017,6.45% in 2018,3.74% in 2019, - 6.60%  negative growth impacted due to  Covid19 in 2020 and 8.95% in 2021.World Bank has projected 6.5% GDP growth for India revising downwards earlier projection  of 7.5%. as against IMF projection of 7.5%.  for the year 2022-23. 

RBI'S statutory Report on"Trend and Progress of Banking in India 2021 -22"  showed that the banking sector is performing relatively better in recent times due to policy measures adopted from time to time. Health of banks continue to improve in 2021-22 with their balance sheet growing at double digit after a gap of seven years, along with improvements in asset quality and capital position.However slippages in restructured assets need to be monitored closely. Timely resolution to stressed assets was essential to prevent asset value depletion. Improving asset quality trends as shown by decrease in Gross Non Performing Assets (GNPA) or  the total value of gross non performing Assets  of Scheduled commercial banks .GNPA which stood at 2.39 in 2010,2.30 in 2011,2.90 in 2012,3.4 in 2013,4.00 in 2014,4.60 in 2015 increased to,7.60 in 2016,9.6 in 2017and an elevated 11.60 in 2018, declined to 9.30 in 2019 , 8.50 in 2020,7.50 in 2021 ,5.8  in 2022 and to 5.00 by September 30 2022.The report clearly shows that credit growth rebounded smartly with consolidated balance sheets of commercial banks showing double digit expansion after 7 years gap, thought deposit growth lagged behind increasing only by 9.9% with retail inflation eroding price stability and tendency to save.In any case after the asset quality review and various  other measures adopted by both RBI and  Government. credit growth became more broad based encompassing personal loans, services sector loans and industrial sector loans.If inflation is low and stable Indian banks can buttress GDP growth.Data for the one year ending November 2022 showed that credit  growth in Service sector increased to 21.36%  from3.2% in November2021, agriculture 13.8% from 10.9 % personal loans 29.7% from12,6 %,and industry 13.1% from 3.4% in November 2021 .

India's external debt position is relatively sustainable in relation to short term debt as a percentage of total reserves which stands at 17.5 I% as against 36.8% for China and 50.5% for South Africa.Similarly India's external debt stock as a percentage of Gross national income is 21.4% compared with 51.8% for South Africa and only 16.1% for China indicating that India's external vulnerabilities are broadly within comfort Zone. As far as foreign trade is concerned India's goods exports having grown only 1.1% in the first eight months of  2022-23 could fall to 2.3% over the full year. CARE study assuming WTO projection of global goods trade growth of 1% expects  1.5% growth for India. However robust services exports and remittance inflows will largely cushion Current Account deficit and India's trade deficit. While Foreign Direct investment (FDI) in the service sector increased from $ 80.51  billion between April 2000-March 2014 to $ 153.01 billion between April 2014- March 2022, manufacturing FDI slowed down from $ 94  billion to $ 77.11billion during the same period.However recent free trade agreements with UAE  UK ,Australia , and attempt for rupee trade already realised with Russia coupled with policy  measures like PLI scheme and other incentives to export sector and also India's G20 Presidency in 2023 are bound to impact the external sector of the economy provided there is stability in both prices and demand conditions.

As per Controller and General of Accounts(CAG) estimate Center's fiscal expenditure for the period April -November, FY 2022-23 came to rupees 9.78 trillion,or 58.9% of the budget estimates (BE) of rupees 16.6 trillion, compared with rupees 6.96 trillion or 46.2% for the same period last year. Fiscal deficit widened due to 11% contraction in non tax revenues, 11% rise in revenue expenditure and massive spike in capital expenditure to 63%. Interestingly corporate tax ,Income tax and GST collections till November 2022 have been  better than the budgeted growth providing fiscal buoyancy to some extent  but fiscal deficit may increase the targeted level due to rise in public expenditure. 

Assuming that India's demographic dividend is optimally utilised, global headwinds are under control and recessionary trends are contained, 5% retail inflation is achieved and maintained domestically, both public and private infrastructure investments are rising steadily, rupee trade is extended to more countries, PLI scheme is extended to more labour intensive  sectors,digital revolution, green technologies,green energy, startups, unicorns and upskilling and reskilling of human resources and labour is further  expanded,leading India to become the second largest economy in the world next decade. Let 2023 pave way in this endevour .




Comments

Dr. Pramod Kumar said…
Well structured and informative. Congratulations
9 January 2023 at 19:40
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