Despite strong global headwinds and aggressive liquidity tightening by the central bank, the Indian economy is still accelerating, said Axis Banks’ chief Economist Neelkanth Mishra, who is also the part-time chairman of UIDAI. Speaking at ICFAI’s NJ Yasaswy memorial lecture in Bengaluru, the part time member of the Economic Advisory Council said India is in a better position to handle global headwinds than its Asian rival China.
Mishra credited this growth to an increase in export of modern services, higher investment in infrastructure and better penetration of basic amenities through the country. While India’s share in global services trade is 4.5%, we have done significantly better in the trade of modern services like remote work, taking up 8% of the market share, he said.
“Improvement in micro-infrastructure facilities facilitates broad-based growth. For example, an increase in the percentage of houses with piped water supply and cooking gas (in both urban and rural areas) improves female labour availability and productivity by reducing the time that would otherwise be used for bringing water and cooking,” he said.
Another important contributor to economic growth was the higher use of the internet. “Cheaper and wider access to wired internet service is an incredible productivity driver, especially with startups taking on more and more remote work from companies abroad,” he said.
Despite being structurally sound, the Indian economy will still be facing a few headwinds in the future, he said. “The need to reduce the fiscal deficit, and higher repo rates will be a continuing issue against growth,” he added. He predicted a slowing of global growth in 2024, which would also hamper the country’s prospects with a fall in the demand for goods and services.
“The US Treasury Bonds’ 10 year yields are very likely to be high in the year to come. This would prompt Central Banks to buy up these bonds, leading to shortage of dollars across the world,” he said. The dollar availability across the world is at the worst level in 65 years, added.
