How India's economy is defying global trends

The world is facing many financial challenges, and the global economy is in a period of turmoil. Several nations are tethering at the edges of an economic crisis. As the UK and Germany grapple with the grips of a severe economic recession, several European nations stand on the precipice of similar economic challenges.

?For example, if we see statistics from April 2023, Sweden, Lithuania, and Estonia recorded negative GDP quarters, while France and Italy only experienced marginal growth of 0.7%. Still grappling with the effects of its recent crisis, Sri Lanka continues to face economic difficulties. The US might be in the green zone in terms of GDP but it has its debt hanging over it like a sword of Damocles.

In stark contrast, however, India is flourishing. For FY2023-23, our GDP growth rate was 7.2%. This makes our prospects for the coming years very promising. J.P. Morgan has predicted India’s GDP growth rate in 2024 to be at 5.5%. Our inflation per year is only around 3-6%, which is the normal range for it to be. However, why is this so? How is India ahead of other countries and not experiencing the same problems?

To understand the semantics, let us cover the basic terms first. GDP (Gross Domestic Product) is the total amount of goods and services produced by a country. The GDP is measured and calculated every three months, representing the economic performance for that specific quarter. If the GDP in comparison to the baseline GDP growth is negative for two quarters continuously, the country is in an economic recession. However, GDP does not show all the workings of a country. Some countries could simply be borrowing more money and propelling their GDP upwards. This is known as their fiscal deficit.

Now, one reason for India’s growth is found in the above point itself.?

High Fiscal Deficit

India has been running a high fiscal deficit to keep our GDP up, while also trying to cut it down per year.

Position in the global market.

India has a huge manufacturing as well as consumer base. With the current population, supply and demand are met in equal measure. Manpower needs are easily met, our tech industry is running strong and a lot of foreign brands wish to expand in India because of our consumer base. India does a lot of exports as well, specifically, metals (steel in particular), petroleum products, mechanical appliances, electronics, etc. to name a few. Thus, global trade for the country is booming like never before.?

Inflation

The world has suffered from two massive shocks to the economy, which are the lockdown and the Russia-Ukraine War. Russia stopped supplying oil and petroleum products to a lot of countries, causing a surge in demand and surpassing available supply, leading to an imbalance. Another situation was the lockdown which caused a lot of countries to borrow or seek international aid or to meet expenses. This caused inflation to shoot up in many countries such as Sri Lanka, Argentina, and most of Europe. However, India managed to keep its inflation from running out of control. The damage done during the lockdown is already being mitigated and commodities are supplied at the level of demand as required.

Developing country

The last matter to keep in mind is that India is still a developing country. Our GDP is around 2.65 trillion dollars right now and our growth rate is at 6.68%. We are in the top 5 countries when the nominal GDP of countries is compared. However, in comparison to the rest of the world, our GDP per capita is abysmally low. India still has a long way to go. It is a fact that a developing country will have a higher growth rate than that of a developed country.

Therefore, India's economy has shown resilience and strength amidst the global economic challenges. With a high growth rate, favourable market position, and controlled inflation, India has emerged as a promising player in the global economy. However, as a developing country, there is still work to be done to bridge the gap in GDP per capita and achieve sustainable and inclusive growth. By addressing the challenges, leveraging its strengths, and implementing effective policies, India can continue on its path of rising prosperity and contribute to the global economic landscape.