Indian Economy Good, Bad and Ugly

India is one of the fastest developing nations worldwide, beating most of the developed nations in terms of GDP growth. India’s growth is outperforming that of many nations and world economists are also bullish towards India's future. Our banking system is very strong. Government finances are stable despite the painful pandemic situation in 2020 and Global inflation that is currently going on.

There is undoubtedly an air of optimism in the country. It successfully hosted the G20, became the first to send a rocket near the Moon's south pole, and has birthed a few dozen unicorns. The soaring stock markets have also had a trickle-down effect on the wealth of the middle class.

India is now the 5th largest economy in the world surpassing the UK last year, but after all this good news and achievements that come in the favor of India, there is another side of it which we can’t see that there is also bad and ugly side of it, so let’s thrive deep into the state of India’s economy under “Modinomics” and look at the good, bad and ugly sides of it.

The Good Side

GDP Growth - India has grown 4% to 5 % above developed nations and FY24 GDP growth projected has been near 8%. Also, in budget 2024, our fiscal and current account deficits have narrowed down.

Digital revolution - The push for digital governance & banking has begun to transform the lives of some of the country's poorest people. Estimates suggest that up to March 2021, around 1.1% of GDP was saved due to digital governance, allowing the government to use this as social subsidies, cash handouts, and also spend on infrastructure building, without running high deficits.

Manufacturing & Export Growth – The make-in-India campaign turns India into the world factory with the added cherry on the top like various PLI (Production Linked Incentives) schemes.

The Bad Side

Job Creation – Employment or job creation is a major problem for India with the rising population, leaving many educated youths facing a bleak situation in finding a suitable job.

Rupee Keep Weakening – India's INR is continuously depreciating against the US dollar, getting directly impacted by higher price-paying terms while importing goods from outside, keeping in mind India is an import-driven country that also gets directly impacted on the fiscal budget.

The Ugly Side

K-Shaped Recovery – India has seen a Two-speed recovery, many economists argue that the nature of India's economic growth post-pandemic has been uneven, or "K-shaped" - where the rich have thrived, while the poor continue to struggle.

Inequality – As per the report of the World Bank there is huge inequality and major difference in LFPR (Labour Force Participation Rate, where male LFPR is 75% compared to female 25%. Participation from rural areas is very low as compared to urban areas.

Per Capita Income - India may be the fifth largest global economy at an aggregate level, but on a per-person basis, it still languishes at the 140th rank.

Remember one thing at the end if you see a half-filled glass of water, no matter how much you argue it still remains half full. That’s how India is currently heading towards it. No matter how much you say about India, it will keep growing and shining by overcoming every obstacle that comes in the way.

Thank you.

Regards,

Pratik Prajapati,

Kautilya, IBS Mumbai