New Delhi: According to recently released Barclay’s report, it states that for India to surpass China and become the leading force in global growth, it would be crucial to aim for an 8 percent growth rate.
According to analysts at Barclay’s, India’s growth has surpassed that of other countries, experiencing strong expansion with relatively low inflation. Moreover, India is on track to achieve a minimum of 6 percent GDP growth while maintaining macroeconomic stability.
‘Amid considerable economic turbulence in rest of the world, India has been an island of relatively better macro outcomes in the past two years. On the surface, India is once again poised to be the fastest-growing major economy in the medium term, as global growth is expected to be weaker through 2023-2024 (compared to historical levels),’ the report mentions.
The report emphasizes the impressive turnaround in India’s investment, describing it as remarkable. It highlights that within just a decade, India has transitioned from being one of the ‘Fragile Five’ economies with significant macro instability, including a heavy debt burden, an unstable financial sector, and a weak fiscal profile, to now having a much more appealing investment landscape.
In 2023, despite a slowdown in India’s economic growth, the report highlights that it has consistently outperformed other countries in terms of both sustained macro stability and overall progress. The government, it says, is also focused on managing inflation.
Despite experiencing rapid growth in the past decade, India’s contribution to global GDP remains at around 10 percent (excluding China). Currently, India accounts for a “much smaller share of the global economy than China” and even lower than the US.
Under current growth projections by the IMF, while the report indicates that India will likely surpass China in terms of growth in the next five years, its contribution to global GDP is expected to fall behind.
Achieving GDP Growth
- The report says, this growth can be achieved if the government puts in place a number of economic preconditions such as nominal savings rate closer to 32.3 percent of GDP against the current 30.2 percent and incremental growth in the workforce of 3.5 percent per annum against the 1 percent now.
- The objective can be accomplished through “an increased involvement of women, a larger worldwide market share, and continued efficient utilization of capital quantified as an ICOR of approximately 5.”
- ‘Investment has typically been the main provider of delta moves for India’s economic growth. While the investment ratio has declined since peaking in FY08, we think India is at a point in its growth cycle where additional investment should generate returns at a more productive pace,’ mentioned report.
- While traditional sectors have taken a backseat in recent years, making way for industries such as telecommunications and digitization, the report highlights the increasing capacity constraints in these areas. As a result, there is now a greater need for investment to return to the traditional sectors.
- Additionally, the report proposes an increase in public investment to stimulate a positive transformation in overall investment and propel the GDP growth rate closer to 8 percent.
