India's Unlimited Potential

With its economic fundamentals in place, this decade could truly be India’s if the reform agenda goes at the pace it is going now

- KEKI MISTRY

Against the uncertain global backdrop, India has been in the spotlight for being the fastest-growing major economy. Foreign investors are acknowledging India’s growth prospects. India as an emerging market clearly stands out.

In recent years, India’s economic growth has surpassed expectations. For instance, during the peak of Covid-19 in FY21, India’s GDP contracted by 6.6% compared to the estimate of a contraction of 9.5%. At the onset of Covid-19, the Reserve Bank of India (RBI) was proactive with its monetary easing and liquidity support. It needs to be commended for the host of measures it introduced.

The gradual lifting of restrictions by states saw both demand and consumer confidence come back sharply from September 2020. Strong GDP growth has continued in the current fiscal with Q1 GDP increasing by 7.8% and Q2 GDP by 7.6%. RBI has increased its GDP target for the year from 6.5% to 7%.

The onset of the Russia-Ukraine war saw spiralling oil prices and inflation started hitting the Indian economy from April 2022. But the RBI reined in inflation through a series of calibrated measures. The one key challenge that

India faces is its dependence on oil. The trajectory of oil prices always needs to be watched as India is the third largest importer of oil in the world. The oil import bill has a very large influence on India’s current account balance.

For instance, the Israel-Palestine conflict is the latest event causing enormous geopolitical concerns. Further escalation could be detrimental to inflation, oil prices, and international trade.