According to recent projections, India’s gross domestic product (GDP) reached US $ 3.75 trillion by FY23 and is on track to achieve US $ 5 trillion by March 2026 provided growth rates of 6.5 to 7% are maintained in the years to come. In March 2015, it had a GDP of US $ 2.2 trillion, and despite the severe pandemic problem, it began to grow.
Turkey, Brazil, India, South Africa, and Indonesia were categorised by Morgan Stanley as the “Fragile Five” countries in August 2013 because they were having trouble developing. India, however, has already overtaken China as the fifth-largest economy in the world after not just emerging from the unstable group of economies. In 2014–15, it had the tenth-largest economy. India now holds the fifth position, surpassing France, Brazil, Italy, Russia, and the UK. The Indian economy is now in good shape and is likely to overtake China as the third-largest economy by 2030 at the latest.
Indian Economy’s development demonstrates its adaptability and promise at a time when many other economies are fighting the global slowdown brought on by the pandemic and geopolitical dangers. It will be fascinating to examine some of the recent growth factors that helped GDP reach its current levels. A few strategic differentiators might be gathered to examine how India could prosper while many other countries are lagging, even though it is challenging to compile all policy interventions and changes launched in the past ten years.
Reforms in the structure
The Make in India project, which is part of a larger set of nation-building initiatives aimed at making India a manufacturing hub, was introduced in September 2014. The GDP contribution from manufacturing will rise from 15% to 25%. Launched in July 2015, Digital India is a flagship initiative to transform India into a knowledge-based society and economy. Launched in July 2015 to foster entrepreneurship and skill development, Skill India. A campaign to create jobs has been undertaken by preparing the young industry.
In February 2015, a Flexible Inflation Targeting (FIT) framework was introduced to maintain an effective grip on the cost of living. FIT required RBI to track and control CPI inflation within a range of 4% +/- 2%. In reality, the RBI must keep CPI inflation at 2 to 6 per cent. According to section 45ZN of the RBI Act 1934, the central bank must submit a report to the government outlining the reasons why it failed to keep inflation within the target for three consecutive quarters as well as the corrective actions it would take to stop the price increase.
Inflation fluctuated between 8 and 12 per cent erratically, reaching double digits in 2009–2010 and 2012–2013. Because of the FIT implementation, the government and RBI focused on containing inflation. After the epidemic, inflation spiked to 7.79 per cent in April 2022 and dropped to 4.25 per cent in May 2023. WPI also decreased over this time, going from 15.08 per cent to minus 3.48 per cent.
High-value old currency notes of Rs. 1000 and Rs. 500 were demonetized in November 2016 to combat black money and regulate counterfeit currency in circulation. There are now new Rs. 2000 and Rs. 500 notes in circulation. Even the new Rs. 2000 currency notes released in 2016 have already been taken out of circulation. The introduction of central bank digital currency (CBDC) on November 1, 2022, is expected to improve currency management by lowering the expenses and share of physical currency.
The Real Estate Regulatory and Development Act (RERA) of 2016 was implemented to increase transparency in the property buying process. Except for Nagaland, all 28 states and 8 Union Territories have notified the RERA guidelines.
The Good and Service Tax (GST) Act was approved by the parliament on March 29, 2017, and the GST subsequently went into effect on July 1 of that same year. GST revenue continued to rise as economic activity picked up. increased government compliance and evasion-prevention efforts, including audits, data analytics, and e-invoicing. From Rs.11.7 trillion in 2018–19 to Rs.18.10 trillion in 2022–23, the annual GST receipts skyrocketed.
Stellar Bank reforms
To support a developing economy, the banking industry must be strengthened. Public Sector Banks (PSBs) implemented a 7-pronged reform package as a result of Gyan Sangam I (January 2015). Because certain banks were providing data inconsistently, the RBI was forced to end its forbearance in loan restructuring and undertake an Asset Quality Review (AQR), which caused banks’ bad load ratios to spike to 11.2 per cent in FY18.
To keep PSBs Basel-III compliant, there needed to be a significant capital infusion. As a result, EASE 1.0, a new set of bank reforms, was introduced in PSBs in 2018 in partnership with Boston Consulting Group (BCG). The EASE reforms edition improved over time, and the current version is EASE 5.0. PSBs were able to compete with their private peers thanks to this set of bank reforms. Large-scale mergers in PSBs as part of bank reforms reduced their number from 27 in 2016 to 12 by April 2020, making them flexible and intelligent.
A “deficient” bank called National Asset Reconstruction Ltd (NARCL) has been founded as a result of the banking difficulties brought on by the epidemic. The National Bank for Financing Infrastructure and Development, or NaBFID, is a development lending organisation intended to increase funding for infrastructure projects.
Deeply exploring the Digital Prowess
Financial inclusion (FI) has been seeking to raise its RBI annual index from 43.4 in 2017 to 56.4 in March 2022 on a scale of 1 to 100 judged on usage, access, and quality. This effort has been driven by the digital banking transformation.
Additionally, the RBI unveiled the “Antardrishti” FI dashboard to continuously monitor banking outreach. The FI efforts benefited close to 500 million individuals. With over one billion digital biometric IDs and about 850 million smartphone and internet users, Adhaar makes it possible to employ real-time payments while utilising the robust digital public infrastructure.
Along with a vast network of bank branches, non-banks, fintech companies, and peer-to-peer lenders, alternative delivery platforms like ATMs, self-service digital kiosks, POS terminals, digital wallets, and business correspondents developed a close relationship with the local client base. A revolution of prospects for speeding digital transformation, even in the hinterland, has been ushered in by nearly 4,00,000 kilometres of optical fibre cables and cheap data.
Through Direct Benefit Transfers (DBT), which reduce processing costs and stop leaks, 850 million people can now receive government aid straight into their bank accounts. The widely used Jandhan, Adhaar, and Mobile (JAM) trinity enables company owners to manage electronic payments while preserving people’s rights, dignity, and privacy. Even small-value purchases with street sellers use digital payment methods.
Productivity-linked incentive (PLI) 1.0 was introduced in June 2021 to turn India into a manufacturing centre. When PLI 2.0 was introduced in 2023, the program’s scope was expanded to include IT devices. When the Foreign Trade Policy (FTP) is introduced in 2023, it gives exports a new boost by switching from an “incentive base” to a “remission base,” and it does so without a sunset clause.
A Lifestyle for the Environment (LiFE) is pursued to bring about change in individual and community behaviour to protect the environment. The governance was improved to focus on gender diversity, sustainability, environmental protection, biodiversity, afforestation, and a faster move towards net zero targets. Thus, altering one’s lifestyle in a climate-conscious manner may be the answer to reducing increased climate dangers.
Hence, on a comprehensive note, we can conclude that India is not only becoming large but also more quickly because of the kind of structural reforms and front-loaded growth-oriented policies that have been implemented in recent years in cooperation with state governments and local self-governments. Thus, by the time the centenary celebrations of Independence begin in 2047, it should be able to enter the orbit of advanced economies.