NEW DELHI: Finance ministry on Monday said the Indian economy has remained resilient amid global headwinds on the back of robust domestic demand, an investment-led strategy due to a transformed climate and high level of public spending, macro-economic stability, apart from a spate of reforms initiated by government over the last 10 years.
A review of the Indian economy released by the ministry said inflation has been reigned in within 2-6% band because of steps taken by government and RBI.
It, however, warned of risks to the external sector from sticky inflation, sluggish growth and fiscal pressures in the global economy, with the tension around Red Sea seen as a potential threat. “Potential risks are expected to emanate from ongoing geopolitical tensions and the recent surge in shipping costs due to re-routing to avoid security risks in international waters, which contains the potential for triggering inflation, especially in terms of energy costs,” the 63-page document released ahead of the interim Budget said.
When it came to India, it appeared upbeat on the overall prospect. “Ten years ago, India was the 10th largest economy in the world, with a GDP of $1.9 trillion at current market prices. Today, it is the 5th largest with a GDP of $3.7 trillion (estimated FY24), despite the pandemic and inheriting an economy with macro imbalances and a broken financial sector. This ten-year journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the country’s economic progress. These reforms have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future,” the review said.
The report said private consumption has been a major growth driver, post-pandemic, helping counter some of the adverse impact of geopolitical risks and sluggish global demand. It said consumption expenditure is balanced across all components, including durables, semi-durables and services. Consumption demand has got a boost from government’s financial inclusion drive and more inclusiveness of rural India, the report argued.
It argued this has contributed to boost private sector capital investment, helping India emerge as fastest growing major economy. While improved balance sheets of banks and companies have helped, a large focus on infrastructure, along with reforms, have pushed growth.
“Multiple proxy indicators and industry reports point to emergence of green shoots of private capex upcycle in post-pandemic years.” The report said non-performing assets have come down and there is a strong demand for loans.
