India’s commencement of its G-20 presidency on 1st December marks a significant step towards undertaking a leadership role on the global stage as the global economy sails through the storm of a unique set of economic challenges. With the theme of India’s G20 presidency “Vasudhaiva Kutumbakam” or “One Earth, One Family, One Future”, India has identified several points which shall be prioritized for its G20 presidency, these include inclusive, equitable, and sustainable growth; LiFE (lifestyle for the environment); women’s empowerment; digital public infrastructure and tech-enabled development in health, agriculture, education, commerce, skill-mapping, and culture and tourism; climate financing; circular economy; global food security; energy security; green hydrogen; disaster risk reduction and resilience; developmental cooperation; fight against economic crimes; and multilateral reforms.
The country has transitioned to a modern economy, wherein it has become more globally integrated and exports a fifth of its output, compared to one-sixteenth at the time of independence. India also benefits from the demographic transition with the help of a lower infant mortality rate and a steady increase in the literacy rate. Therefore, with more equitable income distribution, better employment levels, and globally comparable social amenity provision, India's per capita GDP may expand in the next 25 years as it did in the previous 75 years.
India's economic story during the first half of the current financial year highlighted the unwavering support the government gave to its capital expenditure, which reached ₹4.1 lakh crores (US$ 49.53 billion) during April-October 2022 which is 61.5% higher than the corresponding period of last year. The resilient growth of the Indian economy in the first half of FY 2022-23 has been the fastest among major economies, thereby strengthening macroeconomic stability. India registered a broad-based expansion of 9.7% in the first half of FY 2022-23, supported by robust domestic demand and upbeat investment activity.
In November 2022, the following key frequency indicators highlighted improved performances:
India’s economy grew faster during the first half of FY2022-23 than other economies, driven by strong demand and investment. Inflationary pressures have been moderating since October, with CPI inflation tempering to an eleven-month low in November. On top of that, it has fallen below the RBI’s upper target band for the first time in 2022, mainly driven by the decline in food inflation. Furthermore, inflation expectations have also moderated in the November round of the RBI’s Households’ Inflation Expectations Survey. This bodes well for augmenting consumption in rural and urban regions in the upcoming months. Improvement in business and consumer sentiment is also likely to bolster discretionary spending. The real investment rate during Q2 of FY2022-23 prevailing at a high level of 34.6% demonstrates the Government’s continued commitment towards asset creation.
An overall rise in Rabi coverage with adequately filled irrigation reservoirs plays a pivotal role in the agricultural output growth in 2022-23. An increase in minimum support prices for both Kharif and Rabi crops in 2022-23 and progress in rice procurement have already been supplementing rural incomes in the country. Higher incomes have further resulted in an increase in sales of passenger vehicles, two and three-wheelers, and tractors by a good year-on-year margin in Oct-Nov. The rise in GST collection, robust e-way bill generation, and increased e-toll collection reaffirm the resilience of economic activity.
In addition, steady growth momentum in service activity continues with expansion in PMI Services during Oct-Nov, attributing to the growth in output and accommodative demand conditions, leading to a 5 sustained upturn in sales. The growth impetus in rail freight and port traffic remains upbeat, with further improvement in the domestic aviation sector. Strong growth in fuel demand, domestic vehicle sales, and high UPI transactions also reflect healthy demand conditions.
Continuous capital spending by the central government during the first seven months expanded by 61.5%, amounting to Rs. 4.1 trillion (US$ 49 billion) which totals up to 54.6% of the available budget. With stable foreign direct investment inflows, resurgent FPI inflows, and adequate foreign exchange reserves providing an import cover of 9 months, the external front remains resilient. This has resulted in the Indian Rupee performing well as compared to other EMEs (Emerging Market Economies). As per the data released by the National Statistical Office (NSO), irrespective of the deterioration in global economic activities, Indian exports have registered a growth sequentially as well as yearly in the 2nd Quarter of the Financial Year 2022-23.
As we head into 2023, global economic developments are expected to complicate the outlook further, and therefore continued vigilance is a critical aspect in maintaining India’s external resilience. Going forward, India needs to focus on medium-term challenges such as securing technology and resources for energy transition and skilling its youth for the 21st century economy, while staying the course on fiscal consolidation at the general government level. With continuous efforts during the last several years, a strong platform has been erected on which the superstructure of a middle-income economy can be constructed
Note: The conversion rate used for January 2023 (as of January 03, 2023) is Rs. 1 = US$ 0.012