Indian economy is expected to grow beyond 10% in this fiscal, but inflation is emerging as a key risk
India is bouncing back. The worst phase of the economy, as per the government estimates, is over. On Thursday, commerce and industry minister Piyush Goyal said that economic indicators were pointing to a bounce back, while underlining the country’s commitment to multilateral trade rules.
At a business summit, Goyal also said that India is looking at reciprocal and equitable access for its goods through free trade agreements, while seeking to ensure that it also got a good deal on the services front. The minister, who is leading the negotiations with a host of countries from Canada and the EU to the UK, UAE and Australia, also said some of the trade treaties signed in the past were not balanced, resulting in a massive trade deficit.
Asked about India’s trade with China, Goyal said the country’s exports are growing to every part of the world and, as commodity prices are ruling high in the global markets, “we do expect imports also to grow”. He, however, added that a large part of India’s imports are products, which either it does not produce sufficiently or have a requirement for them as a raw material or for re-processing for export purposes.
“All imports are not necessarily bad. But one has to strengthen India’s domestic capabilities,” the minister added. He also said that the government remained open to talks with farmer unions who were protesting over three laws and maintained any resolution is not linked to assembly elections in Uttar Pradesh.
In a related development, NITI Aayog vice-chairman Rajiv Kumar said the Indian economy is expected to grow beyond 10% in this fiscal, supported by a record kharif crop, bright rabi prospects and strong rebound in trade. However, inflation is emerging as a key risk to sustainable global economic recovery with supply chain constraints and rising energy prices, Kumar cautioned. “We expect India’s real GDP growth in FY22 to exceed 10% supported by a record kharif crop and bright rabi prospects. This will boost rural income and consumption,” he said.
According to Kumar, significant increase in exports will also boost economic growth and employment generation while the gradual pickup in contact-intensive services sector is further likely to support the growth momentum.
“The rapid vaccination drive across the country will ensure that the risk of future waves is minimized,” he hoped.
Kumar further said that the trade growth in India is rebounding strongly, with much stronger imports than exports, reflecting India’s robust economic recovery. “Higher than expected revenue trends driven by both direct and indirect taxes have provided the much-needed fiscal space for required policy action,”.
Globally too, trade is rebounding faster than global economic growth despite constraints in shipping and logistics, Kumar said. “Inflation is emerging as a key risk to sustainable global economic recovery with supply chain constraints and rising energy prices,” he added.
The International Monetary Fund has projected the global to grow at 5.9% in 2021 with the real GDP of advanced economies projected to expand by 5.2% whereas emerging market and developing economies are expected to grow more.
According to World Economic Forum, despite the economic devastation caused by the virus, India’s agile response has been commendable, especially as the country rallied to manage a deadly second wave of the virus early in 2021. “India was the first country to feel the impact of the virulent Delta variant but quickly swung into action to ensure that as many people as possible were vaccinated. One billion doses of the vaccine have already been administered,” says a Forum report.
“The current world order has been substantially altered and this is bound to give rise to a new post-COVID dispensation. In this state of flux, space has been created for aspiring and emerging powers to take center stage and help shape a new world with a better future for all,” the report adds.
“Indeed, rays of recovery are beginning to emerge in our economies. The International Monetary Fund (IMF) projects that the global economy will grow by 6% in 2021, and forecasts 9.5% growth in the Indian economy. At the same time, the world is seeing exponential growth in digital services and infrastructure, from the adoption of large-scale work-from-home arrangements to the use of cloud services and videoconferencing,” the Forum report said. These are definitely hopeful signs for Indian economy. But the coming months are crucial as the virus is still in circulation and India is far from vaccinating its entire population.