Modinomics And Rising India

The International Monetary Fund (IMF) recently called India a star performer, with India projected to contribute 16 per cent to global growth. The IMF report said India is on track to be one of the fastest-growing major economies in the world. India rebounded strongly from the pandemic, with growth surpassing pre-pandemic levels, despite the headwinds major global economies are facing. The net foreign direct investment (FDI) into the country at $5.9 billion rose to a 21-month high in October 2023, from $1.54 billion in September 2023 and $1.16 billion in October 20222. Foreign portfolio investors (FPIs) too have pumped in $20 billion in 2023, showcasing how investor confidence is touching new highs under the dynamic Modi government. India’s forex reserves, in fact, rose to a handsome $616 billion with foreign currency assets (FCA) at $545 billion for the week ending December 15, 2023. The earlier high was $645 billion in October 2021.

Nada Choueiri, Assistant Director of IMF said, “What we have been observing for quite some time now is that India has been growing at a very robust rate. It’s one of the star performers when it comes to real growth when you look at peer countries. It’s one of the fastest growing large emerging markets and it’s contributing, in our current projections, more than 16per cent of global growth this year.” Choueiri also highlighted the factors that worked in India’s favour, including PM Modi’s massive push for investments in infrastructure and logistics, a growing population, and structural reforms including digitalisation, which Modi has personally been involved in, very passionately.

For instance, the UPI transactions in November 2023 were worth Rs 17.40 lakh crore, marginally higher than Rs 17.16 lakh crore recorded in October 2023. UPI transactions in the country increased at a compound annual growth rate (CAGR) of 147 per cent from 92 crore in 2017-18 (FY18) to 8375 crore in 2022-23 (FY23), with regards to volume. As a result, banknote circulation declined 7.8 per cent in FY23 and UPI logged 85.72 billion transactions in the current financial year till December 11, 2023. UPI transactions in the country alone accounted for 62 per cent of overall digital payment transactions in FY23. The Year-on-Year growth in the value of banknotes in circulation has decreased from 9.9 per cent in FY22 to 7.8 per cent in FY23, which is good news.

India’s economy has rebounded strongly from the pandemic, headline retail inflation has moderated to 4.87 per cent in November 2023, with core inflation at barely 4.2 per cent, while wholesale inflation in November was minus 0.52 per cent. Unemployment has hit a record low of 3.2 per cent in FY23. The financial sector has been resilient, the budget deficit has largely eased, and fiscal buffers are in place with tax revenues being very buoyant. Net direct tax collection in the eight months of the current fiscal touched 58.34 per cent of Budget Estimates (BE) at Rs 10.64 lakh crore. This is 23.4 per cent higher than the corresponding period of last year.

Gross collections, before issuing refunds, grew 17.7 per cent to Rs 12.67 lakh crore in the April-November 2023 period. Refunds amounting to Rs 2.03 lakh crore were issued from April to November of the current fiscal. Likewise, the average monthly run rate of GST revenue in the first eight months of FY24 is a sharp Rs 1.67 lakh crore. GST revenue was a phenomenal Rs 1.87 lakh crore in April 2023 followed by the second highest number of Rs 1.72 lakh crore in October 2023. In November, that number was Rs 1.68 lakh crore. The fact that GST revenues are rising despite GST rates coming down dramatically since GST was first introduced in July 2017, showcases the inherent tax buoyancy of the Indian economy. If comprehensive reforms are implemented, India has the potential to experience even higher growth contributed by additional labour and human capital, IMF stated.

Choueiri emphasised on education, skilling, and increasing female labour force participation. As if on cue, data from EPFO has been extremely encouraging. Speaking of female labour force participation, the Employees’ Provident Fund Organisation (EPFO) added 1.53 million members in October 2023, an increase of 18.22 per cent from a year ago. The data showed that 7.72 lakh members were new joiners, including 2.04 lakh women who were first-time additions to the EPFO. A significant 58.6 per cent of the new members were young employees between the ages of 18 and 25. The EPFO number in September was even better at 1.72 million subscribers. The limited point is this – jobs are being added with rapidity and those including Rahul Gandhi, alleging that ‘Modinomics’ is all about jobless growth, are surely barking up the wrong tree.

Another data point lending credence to the fact that the Indian economy is inherently resilient at this stage can be found in the index of eight core industries (ICI), which grew 12.1 per cent year-on-year in October 2023, following a stellar 9.2 per cent growth in September this year. Over the April to October 2023 period, the ICI showed a rock-solid cumulative growth of 8.6 per cent. In October 2023, coal production grew 16.1 per cent, the second highest pace in at least 12 months, while steel and electricity rose 9.6 per cent and 9.3 per cent, respectively. Natural gas output rose 6.5 per cent, while refinery products were up 5.5 per cent. The core sector constitutes 40.27 per cent of the Index of Industrial Production (IIP) and is hence very relevant.

India’s IIP growth rate rose to an excellent 16-month high of 11.7 per cent in October 2023, driven by the manufacturing sector growing by a steep 10.4 per cent, against a contraction of 5.8 per cent seen in manufacturing in October 2022. Power generation rose by 20.4 per cent in October 2023 compared to 1.2 per cent growth in the year-ago period. Similarly, mining output too rose by a handsome 13.1 per cent in October this year, against only a 2.6 per cent growth in October 2022. As per use-based classification, the capital goods segment grew 22.6 per cent in October this year compared to a 2.4 per cent contraction in the same month a year ago. Consumer durables output in October this year grew by a very healthy 15.9 per cent against a contraction of 18.1 per cent in the same month, a year back. Within IIP, consumer non-durable goods’ output increased by 8.6 per cent compared to a contraction of 13 per cent a year earlier. Infrastructure/construction goods posted a growth of 11.3 per cent against a 1.7 per cent expansion.

The October 2023 IIP data also showed that the output of primary goods logged an 11.4 per cent growth compared to 2.1 per cent in the year-ago period. The intermediate goods’ output in October rose 9.7 per cent against a contraction of 2.3 per cent during the corresponding month last year. Moving beyond IIP, another data point endorsing the strong undercurrent in the economy is data from the OLX Mobility report (previously called the Autonote). Unveiling the transformative trajectory of India’s pre-owned car market, the report projects a meteoric rise in value from Rs 2.1 lakh crore in FY23 to Rs 5 lakh crore by FY28 and a volume increase from 4.6 million units in FY23 to 8.5 million units over the next five years, growing at a volume CAGR of 13 per cent and value CAGR of 18 per cent, respectively. This growth is set to outstrip that of the new car market significantly.

(News 18)

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