Owing to some of the tough measures taken by Indian Prime Minister Narendra Modi-led government, Bharat’s economy is witnessing an upward trajectory. Today’s Bharat’s economy is not only witnessing internal growth, it is also playing a pivotal role in the growth of global economy.
o The Modi Government’s judicious and measured response to both the COVID pandemic and later global political challenges has strengthened India’s economic stability, leading to a fast recovery despite worldwide uncertainties.
- This assertion is strengthened by the IMF, which has said that “India has emerged as a star performer” and is projected to contribute more than 16 per cent of the global growth, due to economic reforms in key sectors like digitisation and infrastructure.
- India’s real GDP clocked a growth of 7.7 per cent in the H1 2023-24 (April-Sept 2023), which is highest amongst the major economies.
o In Q1 FY24 India’s real GDP grew by 7.8 per cent & in Q2 FY24 GDP grew by 7.6 per cent. In FY2023, it grew year-over-year (YoY) at 7.2 per cent.
- India’s National Statistical Office is projecting India’s real GDP growth in 2023-24 as 7.3 per cent.
- The International Monetary Fund (IMF) has raised its growth forecast for India’s economy in FY 24 to 6.7 per cent, an increase from the earlier projection of 6.3 per cent.
o By contrast, OECD’s Economic Outlook projects real gross domestic product (GDP) growth for most Advanced Economies to be in a 0.7-1.7 per cent range for 2024, and for emerging economies to be around 4 per cent.
- India’s economic landscape is pulsating with vigor, as evidenced by a plethora of indicators that underscore its robust health and resilience amidst global uncertainties.
o India’s stock market has overtaken Hong Kong’s to rank as 4th biggest equity market globally for the first time.
- The robustness of India’s economic fundamentals has been accompanied by strides made in human development.
o According to Niti Aayog, nearly 25 crore Indians escaped Multidimensional Poverty in the last 9 years; and there has been a steep decline in Poverty Headcount Ratio from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23
High Frequency Indicators
On the back of the robust growth in the July-September 2023 quarter, High-Frequency Indicators indicate that the domestic economy continues to remain resilient and buoyant:
1. UPI transactions in December 2023 scaled a fresh peak, clocking Rs 18.23 trillion in value (42 per cent YoY) and 12.02 billion in volume (54 per cent YoY).
2. India’s manufacturing PMI was 54.9 in December 2023, having been expansionary for 30 consecutive months.
3. India’s Services PMI reached a 3-month high of 59 in December, having been expansionary for 29 consecutive months.
- September 2023 saw the services sector in India having the strongest output in 13 years.
4. December 2023 saw record domestic air passenger traffic with 13.8 million passengers, a jump of 8.4 per cent over December 2022 and 6.1 per cent over December 2019.
- Overall domestic air traffic in 2023 also hit record highs, dwarfing the pre-pandemic peaks and marking the sector’s full recovery from Covid-19’s impact.
5. India’s Index of Eight Core Industries (ICI) grew by 7.8 per cent in Nov 2023 (provisional), while the cumulative growth rate during April-November 2023 has been 8.6 per cent.
6. Sales of cars and utility vehicles posted strong growth in December 2023, helping the 2023 sales volume to top 4 million units a year for the first time.
7. India’s Index of Industrial Production grew 2.4 per cent in November 2023.
- IIP surged to 16-month high of 11.7 per cent in October 2023 led by robust manufacturing, electricity and mining sector expansion.
8. India’s overall trade deficit during April- December 2023 improved by 35.87 per cent to USD 69.34 Billion in 2023 from USD 108.13 Billion in 2022
9. Merchandise trade deficit also improved by 11.45 per cent to USD 188.02 Billion in April-December 2023 from USD 212.34 Billion in April-December 2022.
10. Net foreign direct investment (FDI) into India at $5.9 billion rose to a 21-month high in October 2023.
11. Various indicators of transport activity point towards a gathering pace
- Cargo traffic at major ports recorded a growth of 17 per cent (y-o-y) in November 2023, driven by increased freight traffic of coal, iron ore and petroleum, oil and lubricants (POL).
- In November 2023, Railway Freight showed a y-o-y improvement with originating freight loading of 128.419 tonne achieved against loading of 123.088 tonne in November last year (4.33 per cent growth).
12. The RBI Consumer Confidence Survey of September 2023, both the current situation index and the future expectations index reached a four-year high.
- While the RBI Consumer Confidence Survey remained stable in November 2023, the year ahead outlook, as measured by the future expectations index (FEI), improved, reflecting an optimistic outlook on the general economic situation, employment, income, and spending.
13. CVoters’ Quarterly Consumer Optimism Report, based on the survey conducted in November 2023 among 12,800 respondents representing all socio-economic, age and ethnic categories in the country, highlights that rural India has become more optimistic than urban India.
- There is a steady and consistent rise in the proportion of respondents who say their standard of living has improved over the last year.
14. As per the ‘Quarterly Survey on Indian Manufacturing Sector’ released by the Federation of Indian Chambers of Commerce & Industry (FICCI) in November 2023, the acceleration in manufacturing growth in July-September for ten major sectors is likely to continue for subsequent quarters in financial year 2023-24 (FY24) as well despite slowdown in developed nations.
Banking Sector
1. While driving financial inclusion holistically, we realised that the Banking Sector needs to be healthy, sustainable and profitable.
2. But, with time, we realized and recognized that the banks are not healthy with the dreadful NPAs being brushed under the carpet. We started ‘recognizing’ the NPAs transparently.
3. During the process of clean up, it became evident that the ‘ever-greening of bad loans’ disbursed during 2008-14, kept NPAs hidden from the public & regulators.
- It has been admitted by the ex-Governor RBI himself that the NPA crisis had its origins in the UPA era. (Dr Raghuram Rajan).
4. The “seeds” of the NPA crisis, which were sown during the Congress-led UPA rule through the “phone banking” rampant then, when loans were given to undeserving businesses under pressure from political executives.
5. It was due to the sustained efforts of the Government that we have seen a turnaround in the Banking sector.
- Transparent appointment of the Bank’s senior management through BBB,
- 4Rs approach (Recognition, Resolution, Re-capitalisation & Reforms),
- Asset Quality Reconstruction, etc
6. We’ve replaced ‘political interference’ with ‘professional integrity & independence’ in the banking sector.
7. We cleaned up the Banking mess you have created out of your own greed & the practice of crony capitalism. We cleaned up the dirt that you had quietly swept under the carpet.
8. Public Sector Banks have earned record profits of over Rs. 1 lakh crore in the last financial year (FY 2022-23).
9. Gross NPAs and Net NPAs are at decadal lows.
10. Banks are handing over record dividend cheques to the Government, and those funds are being used for ‘Garib Kalyan’.
11. From being deeply troubled, SBI become the ‘Most Profitable’ company in India as per the recently quarterly results. In Q1 (April-June) FY 2023-24, SBI earned Rs 18,537 crores as profits.
12. We’ve turned public sector banks from being “Debt-laded nightmares” into “Pillars of Jan Kalyan”.
13. From having a ‘Twin Balance Sheet Problem’, we have a ‘Twin Balance Sheet Advantage’.
14. Over the past decade, sustained reforms have enabled a turnaround of the banking sector. The “Twin balance sheet problem” of the past has been converted into a “Twin balance sheet advantage” with strengthened bank balance sheets and improved asset quality, resulting in a banking system that is now comfortable to lend.
15. This is evident from the rising sectoral deployment of credit, with non-food credit registering 16.3 per cent y-o-y growth in November 2023, and with a remarkable increase in credit availability to cargo ports and airports.
16. The financial sector’s health, including SCBs, has consistently improved since March 2018, as reflected in their improved financial parameters
- Gross non-performing assets (GNPA) ratio of SCBs was at a decadal low of 3.3 per cent, while net non-performing assets (NNPA) ratio declined to 0.8 per cent in September 23.
- Capital to risk-weighted assets ratio (CRAR) reached a historical high of 16.6 per cent in September 2023.
17. Public sector banks (PSBs), which earned a record aggregate profit of around ₹1.05 lakh crore during FY 2022-23, showed sustained momentum. PSB profits in Q2 2023-24 more than doubled to Rs 33,643 crore
Strong growth in economic activity has imparted buoyancy to revenue collections
1. The steadily increasing economic activity and various steps taken to improve transparency and use of technology (AI, Machine Learning, Improved Portals) to plug tax leakages in Customs, GST and Income Tax, have resulted in an increase in Tax Collections.
2. Imaandaari Se Tax Dena Aasaan Ho Gaya Hai, Aur Tax Chori Karna Mushkil. (Processes are now easier for honest tax payer and difficult for evaders.)
3. The Faceless Assessment Scheme brought greater transparency, efficiency and accountability in Income Tax assessments eliminate the human interface between the taxpayer and the income tax department.
- As of November 22 2023, over 4.58 lakh cases have been processed under Faceless Assessment, 4.80 lakh under Faceless Penalties and 2.25 lakh under Faceless Appeals.
4. GST Collections were Rs 1.72 lakh crore in Jan 2024 (2nd highest ever), recording growth of 10.4 per cent y-o-y.
- Gross GST collection for the FY 2023-24 (ending December), averaged Rs 1.66 lakh per month, which is 12 per cent higher than comparable period last year.
- Implementation of goods and services tax (GST) has led to increased tax buoyancy for the States: RBI Study of State Finances (Dec 2023)
5. Gross Direct Tax Collections of Rs. 19.72 lakh crore in FY 2022-23 have registered an increase of over 173.31 per cent from Rs. 7.21 lakh crore in FY 2013-14.
6. Net Direct Tax collections increased to Rs 16.63 lakh crore in FY2022-23 from Rs 6.38 lakh crore in FY2013-14 (increase of more than 160 per cent).
- Net Direct tax collections till 10th Jan 2024 was Rs 14.70 lakh crore, 19.41 per cent higher than the net collections for the comparable period of last year.
Inflation
- In December 2023, retail inflation, as indicated by the Consumer Price Index (CPI), was recorded at 5.7 per cent, staying beneath the RBI’s upper limit. Additionally, the core component of inflation reached its lowest level in 48 months, standing at 3.89 per cent.
- Under the UPA Government, the average Consumer Price Index (CPI) was 8.1per cent (between 2004-14), whereas during the Modi Government’s, it stands at a lower rate of 5.66 per cent (2014-23).
- Average food inflation during UPA (2009-14) stood at 12.2 per cent while average food inflation during NDA (2014-23) stood at 4.68 per cent. [2.5 times more inflation under UPA].
- Over the span of less than 5 years under UPA-II—from May 2009 to November 2013—the average prices of various food commodities increased by triple digits! For commodities like potato, onion and tomato, the increase in average prices over this period was a shocking 164 per cent, 323 per cent, and 160 per cent, respectively.
- In November 2013, the price of onion had touched Rs 100 a kg in certain centres like Aizawl and that of tomato was Rs 80 per kg in certain centres like Port Blair.
Increased Formalisation of the Economy
- 29.2 crore unorganised workers registered on E-Shram since 2020.
- Direct tax-to-GDP ratio at a record high of 6.1 per cent in FY23 (the highest since FY 2000-01)
- Steep rise in EPFO subscription base in H1 (April – Sept) FY24; 18.9 per cent year-on-year growth.
- 13.95 lakh net EPFO members added in Nov 2023; 20.05 per cent are female, indicating growing female participation
Broad-based and equitable growth
1. Poverty Reduction (NITI Aayog): 24.82 crore Indians escaped multidimensional poverty in 9 years; Poverty Headcount Ratio fell from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23.
2. Income Trends (SBI Analysis, Jan 2024)
- Weighted mean income increased from Rs 3.1 lakhs in FY14 to Rs 11.6 lakhs in FY21.
- 36.3 per cent of low-income ITR filers moved to higher income brackets.
- Income disparity in lower-income groups reduced significantly.
- Gini coefficient (income inequality measure) improved from 0.472 to 0.402 between FY14-FY22.
3. Gini Coefficient (World Bank): India’s Gini coefficient decreased from 35.7 in 2011 to 34.2 in 2021, indicating reduced inequality. The PM Vishwakarma, introduced in September 2023, offering holistic end-to-end support to the artisans and craftspeople, has already attracted 48.8 lakh enrolments as of the end of December 2023.
India as a Preferred Investment Destination
1. FDI inflows between 2014 and 24 (till Nov 2023) are estimated to have more than doubled over the preceding 10 years.
2. Due to Make in India Initiative, FDI equity inflow in the manufacturing sector between 2014-2022 has increased by 57 per cent over the previous 8 years i.e. 2006- 2014.
3. While India’s FDI flows in FY 2023-24 have been impacted by geo-political headwinds (Gross FDI inflows to India were 15.9 per cent lower on a YoY basis in H1 (April – Sept.) of FY24), FDI inflows to India are expected to rebound on account of strong macroeconomic fundamentals, favourable business environment and rising growth, evidenced by the sharp rebound in Oct 2023.
- FDI inflows to India reached a 21-month high at USD 5.9 billion in October 2023.
4. As per data from NSDL, foreign portfolio investment (FPI) net inflows into Indian equities and debt in 2023-24 have reached a 9-year high.
5. Since FY15, 1,050 companies cumulatively have gone public and raised capital worth ₹3.9 lakh crore, as compared to 441 companies mobilizing ₹1.5 lakh crore in the preceding 9-year period.
6. In a sign of India firming up as an investment destination, India ranks second after China in MSCI Emerging Markets index after weightage surpasses Taiwan. India’s MSCI EM index spiked in eight years, leaping from 7 per cent to 17.1 per cent.
- A report by Nuvama suggests India could exceed a 20 per cent weight in the MSCI EM Index by early 2024 due to ongoing institutional investments and steady FII participation.
- Analysts at Jefferies also predict that India will attract more foreign investment by 2024.
7. The proportion of Japanese companies with business plans in India has jumped from around 35 per cent in 2021 to 45.8 per cent in 2023: Japan Bank for International Cooperation (JBIC) Survey of Japanese manufacturing enterprises conducted in 2023.
- The same survey found that India was the most promising country for overseas business for Japanese firms – nearly half (48.6 per cent) of the firms found India to be the most promising destination.
Revitalisation of Industry
1. A host of schemes today exists to support MSMEs and the revitalization of the manufacturing ecosystem.
2.The flagship Production-Linked Incentive (PLI) schemes for sunrise sectors in particular is expected to catapult manufacturing into the next phase of growth.
3. Production-Linked Incentive (PLI) Schemes: have attracted investments exceeding INR 1.03 lakh crore till Nov 2023 which has led to production/sales of Rs 8.6 lakh crore (USD 104 billion) and employment generation (direct & indirect) of over 6.7 lakh
4. PLI Scheme Impact
- Domestic Electronics Manufacturing: Grew 4x in the last decade, reaching Rs 8.22 lakh crore (US$ 102 billion) in FY 2022-23 from Rs 1.8 lakh crore (US$ 29.8 billion) in 2013-14.
Ø India exported mobile phones worth $11.1 billion in FY 2022-23. By contrast in 2014-15, almost 74 per cent of the mobile phones sold in India were imported.
Ø Apple produced iPhones worth over Rs 1 lakh crore in India in 2023, having ramped up output sharply from the year before. Of this, made-in-India iPhones worth Rs 65,000 crore were exported in the January-December period.
- Pharma Sector: Reduced raw material imports, with the production of unique materials and 39 medical devices.
- Telecom Sector: Achieved 60 per cent import substitution, nearing self-reliance in certain technologies.
- Drones Sector: Experienced a 7-fold increase in turnover since the launch of PLI scheme.
- Food Processing: Increased sourcing of raw materials domestically, benefiting farmers and MSMEs.
5. This has benefitted the industrial value chain, and supported the growth of MSMEs. As per recent SBI study ‘Debunking K-shaped recovery’ (January 2024):
- “Around 19.5 per cent of majorly micro sized firms have been able to shift their income upwards, to classify them into Small, Medium and large sized firms. Out of these, 4.8 per cent firms have transitioned themselves into small firms, around 6.1 per cent firms transitioned into medium sized firms, and around 9.3 per cent firms are transitioned into large sized firms. This clearly indicates MSME units are getting bigger and getting integrated into larger value chains with initiatives like PLI.”
6. PwC’s 27th annual Global Survey: 86 per cent of Indian CEOs are optimistic about India’s economic growth, compared to 44 per cent globally.
7. NeoGrowth Report (10th Jan, 2024): 90 per cent of MSMEs confident about India’s economy in 2024; 91 per cent expect profit increases.
8. ASSOCHAM-Dun & Bradstreet Index (conducted in December 23): SMEs positive about Q4 2023 growth, with high profitability expectations and investment plans.
9. Udyam Registration Portal: Recorded 3.16 crore MSME registrations and 15.5 crore jobs documented as of December 2023.
Comfortable balance on current account
India’s current account balance has been stable, supported by strong service exports and remittances:
1. Service Exports and Remittances: CAGR of 7.1 per cent (FY12-FY23) for services, and 4.5 per cent for remittances, aiding current account stability post-FY14.
2. World Bank Report (2023): in 2023, India was the top recipient of remittances in the world, with an estimated USD 125 billion inflow. In the year 2022, India received $100 billion in remittances.
3. Remittance Sources: Shift in Indian migrants’ destinations from low-skilled to high-skilled jobs in high-income countries, significantly contributing to remittances.
Other Indicators of Continued Economic Improvements
1. In an indicator of increased economic activity, more than 141,000 companies incorporated in the current financial year till January 10 -the highest number of firms incorporated so far.
- More than 44,000 limited liability partnerships (LLPs) were incorporated till January 10, 2024, compared to a little over 28,000 in the corresponding period last year.
2. In 2023, India is set to register the highest Home Sales since 2008, according a report by real estate consultancy JLL India (Dec 2023)
- Residential sales broke all records with average quarterly sales of over 65,000 units till the third quarter of 2023.
3. The total market capitalisation of BSE listed firms crossed the historic US$ 4 trillion mark on November 29.
4. As per the ‘Quarterly Survey on Indian Manufacturing Sector’ released by the Federation of Indian Chambers of Commerce & Industry (FICCI) in November 2023, the acceleration in manufacturing growth in July-September for ten major sectors is likely to continue for subsequent quarters in financial year 2023-24 (FY24) as well despite slowdown in developed nations.
Make in India, for the World
1. Economic Times (Jan 2024): India’s electronics exports grew at a record 22.24 per cent to cross the $20 billion mark in April-December 2023.
- According to industry body India Cellular and Electronics Association (ICEA), mobile phone exports reached $10.5 billion during April to December 2023, comprising 52 per cent of total electronics exports. In FY23, electronics exports stood at $23.6 billion, of which mobile phones comprised $11.1 billion or 43 per cent.
- iPhone exports, which crossed $7 billion in December 2023, constituted 35 per cent of total electronics exports and a whopping 70 per cent of the country’s total mobile exports in the nine months ended December.
- Mobile exports have soared nearly 7 times from $1.6 billion in FY19 to $11.1 billion in FY23. Overall electronics exports have also grown nearly 3 times in the same period – from $8.4 billion in FY19 to $23.6 billion in FY23.
2. Economic Times (Jan 2024): More made-in-India cars hit the roads abroad in 2023. According to data from Jato Dynamics (Jan 2024), Toyota, Volkswagen, Hyundai, Mahindra, Tata Motors, Honda, and Skoda have all witnessed significant growth in exports in 2023.
- Market leader Maruti Suzuki achieved a new milestone by exporting 261,700 passenger vehicles, including cars and SUVs.
- Volkswagen reported a 29 per cent growth in exports, while Skoda’s exports soared by 431 per cent to 1,530 units in 2023.
- India’s car exports totaled 671,384 units in 2023, up 4 per cent from the previous year.
3. “India is the most preferred location for shared global services”: Deloitte 2023 Global Shared Services and Outsourcing Survey (July 2023).
4. Economic Times (Jan 2024): Non-US multinationals set to join GCC gold rush in India.
- As per ANSR: at least 125 of the Fortune 500 enterprises have their GCCs in India among multiple MNCs across the globe. Currently 70 per cent of GCC based in India are US and Canadian companies.
- “Now an increasing number of European, Australian, and even Japanese MNCs are going to set up base here in the next phase of growth,” : Lalit Ahuja, founder and CEO of ANSR.
5. Defence exports reached an all-time high of approx. Rs 16,000 crore in FY 2022-23, over 23-fold increase since 2013-14.
- India is now exporting to over 85 countries.
6. India’s emergence as ‘one of the winners’ in global manufacturing over the past five years as India “quickly emerges as a future export manufacturing powerhouse” (as per ‘Harnessing the Tectonic Shifts in Global Manufacturing’, BCG November 2023 )
‘Made-in-India’ is increasingly visible on American shelves as US goods imports from India rose remarkably between 2018 and 2022:
- 392 per cent increase in consumer electronics
- 143 per cent increase in semiconductor and material shipments
- 70 per cent in mechanical machinery
- 65 per cent in auto components
7. Walmart imported 25 per cent of its US imports from India between January-August 2023, up from 2 per cent in 2018, while shipments from China reduced.
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