Changing Economic Scenario of India: From Fragile Five to Bright Spot
May 29, 2023
The State of Indian Economy has undergone a significant change in the last nine years. There was a time where the Indian Economy was termed as one of the Fragile Economies of the World. The inheritance of Indian coffers to the newly elected Prime Minister Narendra Modi and his government was not very sound. Indian Banks were evergreening the NPA and were sitting on a ticking bomb. There were scores of scams, and investor confidence was shaken. A policy paralysis resulting in lower growth and very high inflation rate was staring India. There was unnecessary liability of Rs.1.5 lakhs oil bonds on account of artificially lowering of fuel prices.
Year 2014 welcomed the PM Modi led government which came with the promise of ‘Ache Din’ and they were soon seen rolling out the carpet for ‘Ache Din’.
There were multi sectoral reforms in all the sectors of the Economy. This was possible with an overhaul of the Indian economy. The bank's balance sheets were cleaned up to reflect a true picture. Recovery mechanisms were revised, banks were recapitalised and further banks were merged. Insolvency Bankruptcy Code was launched. All these efforts have led to an important change in the banking sector. There was a time when a situation in Europe or the USA had a major impact on India. At times such impact was magnified in its magnitude. During the subprime crisis of 2008, fall of Lehman brothers, India too was caught in the turmoil despite not having any exposure on subprime loans. But with changed times, effective control, the banks have emerged stronger. Today when we see the collapse of Credit Suisse or American banks falling like a pack of cards, Indian banks stand tall, their adherence to rules, RBI’s proactiveness and government commitment have made Indian banks much more reliable.
Despite the recessionary winds in the west of today, India stands tall. It is being termed as a bright spot, with the economy with the highest projected growth is nearly 6 % in 2024 as per IMF. The country's vibrant domestic market, rising consumer spending, and increasing urbanization contribute to its sustained economic expansion. The Indian economy is one of the few economies of the world which has been a beacon of growth and potential.
The COVID- 19 had a very bad impact on the economies of the world. Many countries gave stimulus packages including India to revive the industry but putting a break was much necessary. Many thought that the stimulus break was not needed and just like western countries India should also continue. However, India treaded cautiously and used fiscal prudence which contained the inflation levels. The average inflation level was 4.8 % from 2014 – 2022. Even today despite supply pressures due to the Ukraine – Russia war, the Consumer inflation in India is at an 18 months low at 4.7% and Wholesale inflation rate is (0.92).
The macro economy was balanced and India on other hand saw aggressive infrastructure investment. Rudimentary changes like ease of doing mechanisms were introduced enabling a better economic atmosphere for foreign investments. India’s EOB ranking has improved from 142 in 2014 to 63 in 2022. As per the Business Environment Rankings (BER) report published by the Economist Intelligence Unit (EIU) in March 2023, India has successfully improved its BER ranking by four spots globally. India’s rank has improved from 14 for the period of 2018-22 to 10th rank for the period of 2023-27.
The Foreign investments in India has increased from the level of USD 36.05 billion in 2013-14 to USD 84.80 billion in 2021-22 indicating a jump of over 135% in 8 years.
The increased FDI is a testament of Indian businesses. Parallelly, other changes like use of technology on Economy had a major impact. The trinity of Jan-Dhan, Aadhar and Mobile was perfect for the success of Direct Benefit transfer. 48 crore+ Jan Dhan bank accounts opened, with an increase of more than 150% internet subscription in both - Rural and Urban areas, with 1,498 crore Aadhaar e-KYC completed, India saw in nine years alone a saving of Rs. 2.23 lakh crore was made. The digital economy grew many folds as internet users more than doubled. The other reason for the growth of the digital economy was the reduction in the cost of 1 GB data declined from Rs.308 in 2014 to less than 10 rupees in 2022. The digital Economy of India is humungous, about 46 % of the world’s digital transactions takes place in India. UPI alone was able to generate Rs. 139 lakh crore+ transactions in FY 2022-23 alone.
The economic reforms taken by the PM Modi led government since 2014 has now successfully elevated the Indian startup ecosystem to become the third largest startup ecosystem in the world. India now has around 115 unicorns (billion-dollar enterprises). The various schemes like Pradhan Mantri Mudra Yojana, Start – up India, Stand Up India aims at creating an ecosystem which enables an entrepreneurial spirit. Till March 2023,1.44 lakh loans worth Rs. 33,152 crore under Stand-Up India was given to women entrepreneurs alone.
The PM Modi led government in the last nine years through the various reforms has emphasised significantly on improving the ease of doing business for the masses and unlocking the entrepreneurial instinct among them. The focus has been on embedding a deeper and fresh mindset among Indians i.e to evolve to be job creators rather than just be restricted to job seekers. Another scheme that is testimony to this effort is the Pradhan Mantri Mudra Yojana (PMMY). Approximately 8-9 crore citizens have become first-time entrepreneurs after availing of loans under the PM Mudra Yojana.
Co-partnering with the private sector in creating public goods, adopting trust-based governance have been the next steps that follow. By liberalising the entry of private players in the strategic sectors like defence, mining and space, the business opportunities have been enhanced for private players in the economy. The Digitalisation of Economy has done wonders. Total UPI transactions in FY 2022-23 in India through UPI was Rs.139 lakh crore.
The Indian economy has emerged as an inspiration of growth and potential,driven by strong economic indicators, a favourable demographic dividend, FDI inflows, digital transformation, infrastructure development, and sectoral growth. As India continues its journey towards becoming a global economic powerhouse, sustained reforms, inclusive growth, and investments in human capital will continue to remain the priority of the Indian Government.