The world is witnessing a ‘polycrisis situation’ which involves a plethora of challenging situations including high inflation, tightening of monetary policies, high interest rates, affected global supply chains, after-effects of the COVID-19 pandemic and the Russia-Ukraine war.
Despite all the challenges, India has achieved much in the last decade. The country’s long term growth process is steady, stable, diversified and resilient. This stability can be attributed to the stabilization of growth within its sectors like agriculture, industry, services and the transition of the economy towards the services sector.
The resilience of India’s growth can be attributed to the country’s large and spatially diversified economy, as well as to its diversified production structure that is not dependent on a few products, commodities or natural resources. It can also be attributed to India’s diversified trade basket and broad range of trading partners, wherein a slowdown in any one part of the world will not result in a large impact on India.
A wide range of measures have been taken by the Indian Government. Combined with India’s strong economic growth prospects, FDI inflows in India have grown rapidly. India’s FDI inflows, as a share of GDP (2020), were higher than that of several other emerging economies. In the past decade, FDI in India has seen a consistent increase, with FY 22 receiving FDI inflows of US$ 84.8 billion despite the pandemic and geopolitical crises.
Despite various headwinds, India’s overall foreign trade has shown steady growth. India’s overall exports (merchandise and services combined) in April-October 2022 are estimated to be US$ 444.74 billion, exhibiting a growth of 19.56% over the same period last year. Overall imports in April-October 2022 are estimated to be US$ 543.26 billion, exhibiting a growth of 33.80% over the same period last year. An increase was also seen in the value of services exports and imports for the month of October 2022, which stood at US$ 28.58 billion and US$ 16.30 billion, respectively, as compared to the previous years services exports and imports which were at US$ 20.37 billion and US$ 11.64 billion in October 2021, respectively.
Despite weak tourism revenues, the country saw significant increase in net service receiptsand witnessed a significant pick up in India’s merchandise exports and imports that rebounded strongly and surpassed pre-COVID levels during the current financial year.
India achieved an all-time high annual merchandise exports of US$ 421.9 billion in FY 2021-22 (against the export target of US$ 400 billion, achieving 105.4% of the target), an increase of over 43% over US$ 291.81 billion in FY2020-21 and an increase of 33.33% over US$313.36 billion in FY2019-20.
This growth may be attributed to India’s foreign trade policy 2021-26, which primarilyfocuses on MSMEs and India’s newly augmenting export potential by identifying potential products and services in different districts, mapping geographical indication products and services. Foreign Trade Policy 2021-26 is expected to focus on MSMEs and new export potential by identifying potential products and services in each district, mapping geographical indication (GI) products, and setting up district export promotion panels.
A joint survey on ‘Vision Developed India’ Opportunities and Expectations of MNCs’ conducted by CII and EY highlighted India’s focus on reforms and economic growth which will give rise to the foreign direct investment opportunities worth US$ 475 billion over the next five years. The survey showed that 71% of MNCs considered India to be an attractive investment destination for their global expansion.
All measures and reforms like the GST, various digital initiatives and transparency in taxation, amongst other reforms has been greatly applauded by various MNCs and they all share the same optimism that the Indian economy will perform significantly better in the next three to five years. India is seen as an emerging manufacturing hub in global value chains, a growing consumer market, and a global leader in the digital transformation of Government and private sectors alike.
Going forward, in order to sustain the growth rate and with the aim to reach a growth rate of 8% or higher, sustained efforts and contributions are needed form all domestic sectors and support of the global economy. This would include continuous reforms to enhance ease of doing business, faster implementation of infrastructure projects, early closure of free trade pacts and GST reforms.
Not only will this ensure a rise in the income of at least 50% Indians, but will also help in supporting this growth for the next three decades, making India truly a global manufacturing hub and one of the most attractive investment destinations.