Page 11 - CII ARTHA India’s Growth Prospects

Domestic Trends

economic and financial the coming years at a weaker system to address these on growth and recently cent in 2022-23. as it is among the most
inclusion and holds important pace than the average for the challenges, together with imposed trade frictions, such India's Economic Construction services, on the labour-intensive sectors.
promises for productivity two decades before the renewed skilling efforts. India’s as export restrictions on other hand, is estimated to Financial, real estate, and
gains across all sectors of the COVID-19 pandemic. success at exporting services wheat and rice and the spearhead growth with a professional services are
economy. Moreover, the Geoeconomic fragmentation demonstrates the significant Import Management System double-digit surge of 10.7 per expected to maintain a strong
government’s infrastructure is on the rise with tensions payoffs of quality education. for IT equipment such as cent in 2023-24, supported by performance, projecting 8.9
investment push is upgrading escalating in the form of trade Building on this, and focusing laptops, tablets, and personal Growth Remains a robust performance in the per cent growth compared to
logistics, providing a strong restrictions and other on industry-centric and computers, could be first half of the year, The 7.1 per cent in 2022-23.
basis for private sector inward-looking policies. The forward-looking skilling counterproductive in the strong growth in construction Public administration and
investment and growth. But wars in Ukraine and the programs can help ensure medium to long run. augurs well for employment defence are also expected to
perhaps India’s most Middle East are examples of workers have the right skills Unwinding trade restrictions on a Strong perform well in 2023-24.
significant potential resides in geopolitical risks materializing, to succeed in the job market. and removing tariff and
its young and growing threatening global trade and And in this context, the non-tariff barriers would
population, which could commodities markets. And private sector has a crucial increase integration into
potentially add about 10 that is not even taking into role to play as a partner global value chains, boost Footing
million people annually to the account the major challenges involved in the development productivity, help create more
labor force by 2050. Should that climate change is likely to and implementation of those jobs, and boost overall growth
these numbers translate into present for India and the skilling programs. in India. At the same time,
sustained increases in region over the coming Streamlining labor and food security concerns would
productive employment (if far decades. business regulations would be better addressed by
reaching reforms continue, as help remove obstacles to agricultural reforms to
noted below), India’s To navigate this complex private-sector growth. Four enhance market functioning
economic and human environment, India must leap new labor codes were by allowing price signals to ndia’s real GDP is estimated While the real GDP is
development would forward in its development recently passed by Parliament convey the right incentives to I to grow at an impressive estimated to record a
significantly accelerate. journey with an ambitious between 2019 and 2020, to market participants. rate of 7.3 per cent in the marginal increase growth
he global economy is challenges such as climate reform agenda that boosts consolidate, modernize, and fiscal year 2023-24 as per the compared to the previous
showing resilience, but change can hardly be Countries that have seen growth and creates good jobs. streamline regulations on Advancing this structural first advance estimates of year, nominal GDP is
challenges remain significant. addressed in a fragmented rapid gains in economic The development of physical wages, industrial relations, reform agenda can boost national income, slightly expected to slow down to 8.9
Growth in the world’s major world. Greater multilateral G20 presidency in 2023 paved account deficit remains development in recent and human capital should social security, and India’s growth and help higher than the 7.2 per cent per cent growth in 2023-24
economies has surprised on cooperation is a precondition the way for progress on comfortably within historical decades have generally both be at the center of this occupational safety, health, harness its demographic recorded in the previous year. compared to the substantial
the upside in the second half for global prosperity, and global issues, particularly in norms and its financing does benefited from integration in agenda, complemented by and working conditions. dividends. The promise of a The first half of 2022-23 16.1 per cent seen in the
of 2023. Moreover, a soft champions to advocate for advancing multilateral not appear problematic. Not global markets. Access to ensuring that those resources Importantly, the new codes prosperous development path witnessed robust economic previous year. This
landing this year appears such cooperation are needed. cooperation on debt only is the external sector Western European markets are put to their best use. To introduce significant is within reach if the reforms activity, boasting an average deceleration is attributed to a
increasingly within reach as resolution in heavily indebted position robust, but also (and financing) helped Eastern that end, India can better provisions that alleviate are enacted. Now is the time real GDP growth of 7.7 per sharp decrease in the GDP Government frontloading of
inflation has been declining countries. banks and corporates balance European countries grow expand its potential by constraints discouraging firm to act. cent. However, the second deflator which is estimated capital expenditure has fuelled
without significant output sheets are looking their rapidly following the collapse bolstering education, growth and formal job half of 2023-24 is expected to increase by at 1.6 per cent in investment growth which
costs in many parts of the Amid a challenging strongest in several years. In of the Soviet Union. The East streamlining labor and creation. Accelerating their References experience a marginal 2023-24, significantly lower registered a healthy pace of
world. However, neither environment, India has indeed other words, India is enjoying Asian tigers’ economic business regulation, and implementation would make decrease, projecting a growth than 8.9 per cent reported in 9.1 per cent in H1 of 2023-24

global growth nor interest achieved a strong a period of relative take-off was facilitated by removing trade barriers. labor markets more flexible ASER. 2023. Annual Status of rate of 6.9 per cent. the previous year. and expected to increase
rates are expected to return macroeconomic performance, macroeconomic and financial deepening economic links while protecting workers. Education Report (Rural) further to 11.1 per cent in
to their pre-pandemic levels. helped by prudent policies stability, notwithstanding the with the rest of Asia and the INDIA’S SUCCESS AT Efforts to remove 2022. https://img.asercentre. H2. States, too, have played a
Financing costs for India is emerging as an and reforms. Growth in the global challenges and risks. global economy. China, whose EXPORTING SERVICES bureaucratic inefficiencies and org/docs/ASER%202022%20re REAL GDP POISED ROBUST EXPANSION On the demand side, supportive role in increasing
governments, households, and important player in that two post-pandemic years level of development was DEMONSTRATES THE improve the business climate port%20pdfs/All%20India%20d FOR A REMARKABLE IN NON-AGRI SECTOR capex with a robust 52 per
businesses are thus likely to respect. With its increasingly (that is, FY2021/22 and Looking forward, India has comparable to India’s in terms SIGNIFICANT can be supported by India’s ocuments/aserreport2022.pdf. GROWTH OF 7.3 PER BALANCES THE SLUMP of favourable government investment remains a critical cent surge in H1 of 2023-24
driver of growth, with private
remain elevated at times of significant role in the world FY2022/23) has been robust, great potential to grow and of GDP per capita as recently world-class digital public Accessed on August 8, 2023. CENT IN 2023-24 IN AGRI SECTOR Overall, high GDP growth is policies, a significant consumption lagging behind. by 17 select states.
already high public and private economy, it is expected to averaging 8.1 per cent. develop over the coming as the early 1990s, has grown PAYOFFS OF QUALITY infrastructure. For example, IMF. 2023a. Geoeconomic expected to be contributed improvement from 1.3 per Private consumption,
debt, a significant vulnerability. contribute about Inflation which rose to 6.7 decades. Recent rapidly since then, having EDUCATION the new Udyam Portal Fragmentation and the Future by non-agriculture sector, cent reported in the contributing 57 per cent to Exports have emerged as a
16 per cent per cent during 2022/23 reforms have taken steps to unleash the offered by the country’s of Multilateralism. Staff This remarkable growth The agriculture sector is especially the industry previous year. big drag on growth, projecting
Escalation of regional conflicts to global appears on a firmly bolstered this manufacturing sector to Ministry of Micro, Small, and Discussion Note 2023/001. performance is underpinned experiencing a marked segment. Mining and quarrying GDP, is expected to grow at a growth of only 1.4 per cent
only 4.4 per cent in 2023-24,
and geoeconomic growth declining path. After rising potential. India’s generate export-led growth. Strengthening education Medium Enterprises https://www.imf.org/en/Publica by robust performance of slowdown, estimated to grow is expected to do well with a The services sector, while trailing the 7.5 per cent in 2023-24 on the back of
tions/Staff-Discussion-Notes/Is
fragmentation are also threats this year. to 12.9 per cent of GDP world-class (particularly at the primary streamlines business sues/2023/01/11/Geo-Economi high-frequency indicators. at a meagre rate of 1.8 per growth rate of 8.1 per cent in displaying healthy growth, has recorded in the previous year weak external demand, a
to the global economy. Moreover, in FY2020/21, the general digital public However, India is set to and secondary levels) and registration for some of the c-Fragmentation-and-the-Futur Strong growth in GST and cent in 2023-24 compared to 2023-24 compared to 4.6 per moderated slightly compared due to weak rural demand sharp decline from the 13.6
Research by the IMF has its government overall deficit infrastructure, for encounter a more complex skilling can help address country’s most important job e-of-Multilateralism-527266. direct tax collections, 4 per cent in 2022-23. The cent in the previous year. to the previous year. Trade, per cent growth in the
shown that fragmentation successful is being brought down, albeit example, is global landscape along its India’s skill shortages and creators. IMF. 2023b. India: Staff Report increased airline and train weak growth in the Utility services are also hotels, transport, and resulting from subdued previous year. Imports are
agriculture growth coupled
could impose significant costs, gradually. The current fostering growth path forward, mismatches. Workers in for the 2023 Article IV passenger traffic, credit agriculture is attributed to expected to record robust communication sector, in with high food inflation. also estimated to moderate in
up to 7 per cent of global compared to the favorable general have fewer years of Trade could help ensure Consultation. https://www.imf. expansion, manufacturing PMI erratic monsoon that dragged growth at 8.3 per cent along particular, exhibit notable Government consumption, 2023-24, recording a growth
GDP (IMF, 2023a). conditions that facilitated the formal education than resources are put to their org/en/Publications/CR/Issues/ growth and moderation in the down kharif production by with manufacturing sector moderation, with estimated however, is projected to grow of 13.2 per cent compared to
Moreover, global prosperity of other Asian desirable (IMF, 2023b), and best use in the economy, 2023/12/18/India-2023-Article- gross NPAs ratio, collectively 4.6 per cent from previous 17.1 per cent in 2022-23.
economies in recent decades. education quality remains low reducing misallocation and IV-Consultation-Press-Release- bode well for high growth of fiscal and risks to rabi recording a steady 6.5 per growth of 6.3 per cent in at 4.1 per cent in 2023-24
Global growth is slowing (ASER, 2023). The 2020 inefficiencies. In that sense, by Staff-Report-and-Statement-by the economy. production from low water cent growth, supported by 2023-24 compared to 14 per compared to an anaemic 0.1
down, with the global National Education Policy limiting competition, -the-542605 reservoir levels. lower input costs and a slew per cent in 2022-23.
economy expected to grow in aims to revamp the education protectionism can be a drag
10 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 11
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
FEBRUARY 2024 FEBRUARY 2024

according to Niti Aayog and are hesitant to under Article 6 of the Paris consider implementing a
RMI. The move encourages finance/refinance large-scale Agreement. It will help nationwide policy mandating
manufacturers and project green hydrogen projects. create a marketplace for the use of Green M15 fuel i.e.
developers to invest in green • The production cost of Indian green fuels like green mixing 15 per cent green
hydrogen and its derivatives various green fuel hydrogen and its methanol with petrol, in
like green ammonia and technologies, such as green derivatives, green methanol, transportation and other
methanol, putting India among hydrogen and its and SAF, among others, in applicable sectors, supported
those leading countries, such derivatives, is higher. the international market. by incentives for producers
as the United States and the However, grey hydrogen, • There’s a need for speeding and consumers to adopt this
European Union, which have alongside various grey up strategic interventions fuel. This could be a pivotal
allocated public funding for manufacturing methods, has for the Green Hydrogen step in India's journey
green hydrogen. towards a greener and more
historically benefited from Transition Program by
subsidies. Without a robust offering incentives for both sustainable future.
Establishing a market for green and liquid global carbon green hydrogen production • To ensure widespread
ammonia and methanol is a market, pricing the value of and electrolyser availability of Green M15 fuel,
global issue. In India, carbon and embedded manufacturing. These there’s a need for investment
forward-thinking standards by emissions in the production initiatives will catalyze in the necessary
the Bureau of Indian Standards, and usage of grey hydrogen industry growth. infrastructure for its
such as blending DME with becomes challenging. This is production, distribution, and
LPG and methanol with diesel, why, initially, green • The cost of renewable storage.
are significant steps towards hydrogen seems more energy can be further
integrating green fuels. reduced through energy • Campaigns should be
expensive than grey surplus banking provisions, launched to educate the
hydrogen.
especially for sectors public and other stakeholders
• The cost of funding remains mandated to use green about the benefits of using
a persistent bottleneck, hydrogen. Green M15 fuel and address
presenting a considerable • The government should misconceptions.
challenge for project implement targeted
developers, impacting the incentives to boost the By adopting these
optimization of capital export of green molecules. recommendations, India can
expenditure and project It will help establish India as make significant strides towards
execution. energy self-reliance,
a global leader in environmental sustainability, and
renewable energy.
Suggestions • A mechanism should be economic growth.

developed to facilitate Conclusion
Challenges To address the challenges, we low-cost financing and
provide benefits like
suggest that the government
take several steps to provide a accelerated depreciation This is the time to take
Despite government efforts much-needed boost to the for green hydrogen immediate action to overcome
to promote green hydrogen industry, such as: infrastructure investments. all the bottlenecks on the road
and its derivatives, the sector • The government should towards leading the global
is still in its infancy, and • As in the initial days of expand the FAME India transition to sustainable energy.
acknowledging and addressing renewable energy, the (Faster Adoption and With right policies in place and
the hurdles that impede our government mandated its Manufacturing of (Hybrid the development of a market for
full potential in this critical usage through Renewable &) Electric Vehicles in India) green methanol and ammonia,
sector is essential. Among the Purchase Obligation (RPO). Scheme to include green India can unlock the full
various challenges are - potential of green hydrogen and
Similarly, we suggest that a methanol vehicles in it. It its derivatives. Moreover, it will
• There isn’t much existing quota should be mandated will not only boost the provide a much-needed boost
demand and a developed for the use of green market but also provide for the production, distribution,
market ecosystem for hydrogen in sectors like support to the green and usage of green hydrogen and
green hydrogen and its fertilizers, chemicals, steel, hydrogen ecosystem in the its derivatives across sectors.
derivatives like green and power generation. country. Such initiatives will not only help
ammonia and methanol, not Creating demand through • There’s a need for funding India in achieving targeted
only in India but also policy will spur sectoral and support for research climate goals but also position it
globally, compared to other growth and reduce the and development in the as a leader in the green energy
conventional fuels. production cost of green areas of green hydrogen revolution.
hydrogen.
• Project developers face and methanol-based
difficulty in getting final • Leveraging its international technologies. It will further
offtake agreements signed. relations, the government help enhance efficiency and
should expedite the signing reduce costs.
• In the absence of advance
offtake contracts, lenders of bilateral agreements • The government should