Cheers and challenges of Indian economy’s resurgence

The Indian economy continues to be resilient. The recently released data of the National Statistical Office (NSO) showed the country’s GDP growth surging to a six-quarter high of 8.4 per cent in October-December, thus pushing up the growth rate for 2023-24 to 7.6 per cent as against the earlier estimate of 7.3 per cent.

Among the sectors, manufacturing posted the highest growth rate in double digits at 11.6 per cent, while the construction sector grew at 9.5 per cent. Agriculture, however, recorded a contraction of 0.8 per cent in October-December. The private final consumption expenditure, an indicator of consumption demand, rose by 3.5 per cent year-on-year in October-December, while the government’s final consumption expenditure decreased by 3.2 per cent. The gross fixed capital formation, an indicator of investment, grew by 10.6 per cent during the third quarter.

State Bank of India (SBI) in its research report ‘Ecowrap’ has also projected that the GDP growth for the current financial year could be within striking distance of eight per cent.

“The third quarter GDP numbers jolted the psyche and cognitive framework of most in markets, while sweeping some by a pleasant surprise. Clearly, right policy prisms and perspectives can trump irrational expectations bordering fault lines,” the report stated. It added that with the government’s efforts to ensure quality of life for all citizens and stopping leakage of benefits through direct benefit transfer, for the first time the per capita GDP at current prices crossed Rs. two lakh mark in 2023-24. As the figures are buoyant, so are the economists. However, a section of them is not too convinced with the signs of resurgence in the Indian economy.

Let us have a look at some other figures. The outstanding internal and external debt and other liabilities of the Government of India at the end of 2024-2025 has been estimated to be Rs. 183,67,132.46 crore, as against Rs. 168,72,554.17 crore at the end of 2023-2024 (RE). Internal debt comprises loans raised in the open market, compensation and other bonds, among others. It also includes borrowings through treasury bills including treasury bills issued to state governments, commercial banks and other investors, as well as non-negotiable, non-interest-bearing rupee securities issued to international financial institutions. Another SBI research report, ‘The Ascent of the New Middle Class in Circular Migration’, predicted that the per capita income would go up from the current Rs. two lakh to Rs. 14.9 lakh by 2047. India’s per capita income currently is among the lowest in the lower middle-income countries.

Equally important is the need to look into the role of other global financial institutions in shaping up the Indian economy. As per an estimate, the World Bank’s support to India is currently spread over 127 active projects with a combined worth of over $28 billion.

To date, Asian Development Bank (ADB) has committed 605 public sector loans, grants, and technical assistance totaling $52.6 billion to India. Cumulative loan and grant disbursements amount to $40.71 billion. These were financed by regular ordinary capital resources, and other special funds. ADB’s sovereign portfolio comprises 66 loans totaling $15.4 billion provides the details on its official website, accessed by the author on March 10. Similarly, Japan International Cooperation Agency (JICA) is also a major financer got several projects in the country, including Mumbai Trans Harbour Link and Mumbai-Ahmedabad High Speed Rail.

As we are moving towards the goal of $ 30 trillion economy by 2047, we have to see and ensure the positive impact of investments on the common people’s ease of living by guaranteeing its sustainability. As of now, rural India has not benefited much from the resilience in the economy, despite the fact that 70 per cent people are still living in villages, and a majority of them have suffered multiple deprivations and discriminations for ages. The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) had a clearly stated purpose to help rural poor with some fixed annual gainful jobs. It has certainly helped a lot but perhaps not the way the policy makers had visualized its impact. There is a need to further institutionalize its implementation, auditing the quality of works and checking leakages.

It is likewise with the Mid-Day Meal Scheme, Right to Education Act, Self-Help Groups and Anganwadi centres, which do not occupy a prominent place in the realm of investments.

Quite often one gets the impression that these schemes are being treated as baggage by the policy makers, and not as a tool to transform the country in terms of its people’s socio-economic resilience. The quality and skills of human capital matter a lot in achieving the goal of sustainable inclusive economic development. Therefore, every affirmative and welfare scheme should be occupying a place of eminence in the realm of private and public investments, as these schemes serve as vital mechanisms for addressing societal inequalities, promoting inclusive growth, and to uplift the marginalized communities.

By prioritizing investment in such schemes, both private and public sectors can contribute significantly to the betterment of society, ensuring that resources are channeled towards initiatives aimed at enhancing education, healthcare, social protection and economic opportunities for all. Embracing these schemes in investment portfolios not only yields positive social outcomes but also fosters sustainable development and a more equitable distribution of resources, ultimately leading to a more prosperous and harmonious society for all.

However, India has not seen much domestic investments getting into creating quality and affordable health and education infrastructure for the poor people. Even public funding has not been adequate. In a country like ours, we need to spend at least 12 per cent of GDP on health and education. As a result, a vast section of people is still deprived of quality health and education facilities.

How to ensure quality jobs reach the masses or those on the margins remains another great challenge for the burgeoning economy. Investing in accessible and relevant education and vocational training programs equips individuals with the necessary skills to access higher-quality employment opportunities. Providing support in the form of mentorship, access to capital, and business incubation services empowers individuals from marginalized communities to create their own employment opportunities and contribute to economic growth.

We have to focus, among other things, on enforcing labour laws that protect workers’ rights, promoting diversity and inclusion initiatives within companies, and offering equal opportunities for advancement regardless of background or socio-economic status.