With the 2023 World Economic Forum in Davos dominated by discussions of economic growth, or the lack thereof in most developed countries, one country is often cited as a bright spot.
Bank of Japan Governor Haruhiko Kuroda said in the closing session of the event that India is doing “extremely well,” while highlighting acute challenges facing its neighbors Sri Lanka, Bangladesh and Pakistan.
The uproar across the country was partly staged, as Indian executives, officials and investment seekers were heavily represented in the Swiss mountain resort (although Prime Minister Narendra Modi was not present).
But India is already shining among the world’s largest economies, with Europe hovering on the brink of a possible recession and slowing growth in the United States.
And during the International Monetary Fund be seen China is outpacing global growth again in 2023 as the country reopens weather forecast The 4.4% rise in GDP is well below India’s estimate of 6.1%. Center for Economics and Business Research Believes India could overtake Germany and Japan to become the third largest economy in the world over the next decade, reaching $10 trillion by 2035.
Several CEOs of non-Indian companies at the World Economic Forum summit, including Nokia CEO Pekka Lundmark, highlighted India as one of their fastest growing markets.
Ericsson President Borgje Ekholm said that the 5G infrastructure is developing rapidly there.
“It’s for the whole of Digital India, creating a digital society in India,” Ekholm told CNBC. “They are on a strong path with 4G but now they are building 5G at a faster pace.”
India, he continued, “will soon have the best digital infrastructure outside of China,” led by telecom giants Bharti Airtel Wujio, he added.
“They are building quickly, and this will help India to digitize, and if you compare that to what is happening in Europe, we are behind.”
India also has ambitions of becoming a A global center for the chip industry, as concerns grow about the West’s dependence on Taiwan; And according to India’s Commerce Minister, Apple wants to move 25% of its iPhone manufacturing goes to the state (although Apple has not confirmed this). It is already a file global leader in digital payments; It is looking to develop in areas including solar energy, wind energy and green hydrogen production.
Strong tailwind
“We are very optimistic, very positive about India,” Rajesh Gopinathan, CEO of Tata Advisory Services, told CNBC.
He said that the stable political environment and large government investments in infrastructure provide a positive environment for growth. and that the country was well positioned for the planned energy transition as it was “building a new element with no old infrastructure out of it”.
“The global economy and the size of India meant there was enough capital,” Gopinathan said. “So if you combine demographics, the demand side, and the availability of capital, I think the upside is important. Of course it has to be executed carefully, but it’s there to deliver.”
Despite future commitments on the growth of renewables and reaching net zero emissions by 2070, India benefited from buying Russian oil at a deeply discounted price, while Europe faced price spikes, market volatility and fears of a shortage.
Inflation was also less severe in India than in many other countries, with the consumer price index coming in at 5.7% in December.
When asked by CNBC’s Steve Sedgwick, State Bank of India President Dinesh Kumar Khara said India was “definitely” the real deal in good shape compared to its competitors.
He referred to the launch of vaccines in the country, its measures to tame the growth of consumer prices, which helps ensure food security, and its focus on creating infrastructure; Although inflation is recognized still to be a ‘risk’, and that hampering global growth would also affect the country.
As Anish Shah, CEO of the Mahindra Group, told CNBC: “India will be affected. When the world passes Recession It’s not as if India will be left out.”
However, he also said, “What we feel is that the impact on India is going to be a lot less because of the fundamentals that are inherent in the country right now, and the fact that inflation in India hasn’t really accelerated. It’s well under control.”
Not everything is rosy
Deloitte Report 2021 He said India still needs to do more to build infrastructure and reform systems to improve the ease of doing business and attract more foreign investment.
Some analysts too Argues Its recent surge in capital inflows – with the Sensex stock market index up 5% year-on-year, while Europe’s S&P 500, Europe’s Stoxx 600, China’s SZSE Composite and Hong Kong’s Hang Seng Index – have fallen sharply. As a result of relative stability compared to fluctuations elsewhere, it can slow when external factors change.
Meanwhile, the country still has one of the highest levels of income inequality in the world worsened During the pandemic, poverty persisted — even though the poverty rate was measured by one of the metrics fell off 55.1% to 16.4% over the past 15 years.
Swach Ray, a fellow and deputy director at the Carnegie Endowment Research Center in India, noted skepticism about much of the optimism from Davos.
he pointing to that recent GDP growth figures of 6.3% annually in the third quarter of 2022 and 13.5% in the second quarter were not much higher than the same periods three years ago, especially when government-controlled sectors are excluded; and that current growth rates are skewed by the pandemic-related contraction of 6.6% in 2020-2021.
He also noted that comparisons between developed and developing countries can be misleading, with the former naturally experiencing more moderate growth.
“While it is true that the Union Government’s capital expenditure on infrastructure development has increased, it is not clear whether the total public sector capital expenditure has increased,” Ray told CNBC via email.
On claims of political stability, he replied, “We should not equate the dominance of one party with political stability.”
Modi has been the prime minister since 2014.
India’s era of coalition politics from 1989 until then, Ray said, produced “impressive economic results,” with per capita income in constant prices tripling over the 25 years, while economic growth slowed in the years leading up to the pandemic.
“So the kind of stability that comes with a dominant party is neither necessary nor sufficient for rapid growth in India,” he said.