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.
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.
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.
o India’s stock market has overtaken Hong Kong’s to rank as 4th biggest equity market globally for the first time.
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.
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.
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.
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
12. The RBI Consumer Confidence Survey of September 2023, both the current situation index and the future expectations index reached a four-year high.
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.
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.
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.
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
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.
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.
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).
Inflation
Increased Formalisation of the Economy
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)
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.
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.
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.
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
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.
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):
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 $100 billion in remittances.
3. Remittance Sources: Shift in Indian migrants’ destinations from low-skilled to high-skilled jobs in high-income countries, significantly contributing to remittances.
Other Indicators of Continued Economic Improvements
1. In an indicator of increased economic activity, more than 141,000 companies incorporated in the current financial year till January 10 -the highest number of firms incorporated so far.
2. In 2023, India is set to register the highest Home Sales since 2008, according a report by real estate consultancy JLL India (Dec 2023)
3. The total market capitalisation of BSE listed firms crossed the historic US$ 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.
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.
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.
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.
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:
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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