India poised to achieve $5 trillion economy dream through ‘Atmanirbhar Bharat’ strategy, says expert

The forecast for the global economy is becoming gloomier as observers are seeing a distinct possibility of recession in the near future. The Russia-Ukraine conflict further accentuated the galloping inflation to raise the cost of living to challenging levels globally,triggering fears of a global recession.

The recent lockdowns imposed by China to curb fresh Covid surges and the resultant supply chain disruptions are further aggravating the precarious economic condition. The International Monetary Fund, in its most recently published World Economic Outlook has projected global growth to decline from an estimated 6.1 %in 2021 to 3.6 % in 2022 and 2023. The prediction is largely influenced by the alarming figures of global inflation.

In the US, inflation in June was 9.1%, much above the consensus expectation of 8.8%. A survey by the US brokerage company Goldman Sachs predicts a 30% chance of America seeing a recession in the next 12 months. Similarly, Bank of America Securities’ economists have also estimated a 40% chance of recession hitting America in the coming year. These statistics make it quite evident that the Federal Reserve will have to step up its efforts to control inflation. Predictably, the US Federal Reserve is expected to raise interest rates by 100 basis points at its upcoming meeting later this month, according to major analysts. The rate hikes are expected to dent consumption and inhibit growth.

The depressing indications have heightened the fears of a severe global recession. However, the Indian economy is poised to continue resiliently on its growth path.

The Indian growth trick

Through the Atmanirbhar strategy, the country is earnestly preparing to accomplish its goal of achieving a GDP of $5 trillion in the next few years.

A rise in domestic demand and international investment are expected to be the primary growth drivers. The Indian government has extended invitations to several businesses to establish manufacturing facilities in India, which is bound to boost the country’s economy and generate employment.

The government of India is endeavouring to realisethe country’smanufacturing potential through flagship programmes like Make in India and the Production Linked Incentive (PLI) schemes. Besides, the government is emphasising on capital spending to support the economy in the Covid pandemic’s aftermath.

These measures are bound to boost the manufacturing sector. Also, the macro economic trends of ‘China Plus One’, which refers to businesses reducing their dependence on China for production, further presents a significant opportunity for India to become a production hub.

It would be interesting to see how the Indian economy faces the prospect of recession. Observers believe that India’s dependence on oil imports immunises them against recessionary fears. The impending recession would drive down commodity prices internationally, allowing the nation to weather economic storms. Nevertheless, experts anticipate a mild and short-term impact of the recessionary trends on India’s economy.

Moreover, India relies mostly on local spending. Hence, till domestic economic conditions stay favourable, it is unlikely that a recession in the US will have a materially detrimental effect on India’s economy. In comparison with other developing market economies, India may experience a milder impact.

Consequently, over the next few years, India's rate of economic growth may surpass those of other comparable economies despite the current headwinds.

Many observers, including foreign brokerage firms and international organisations perceive India as having enormous economic potential. With an Atmanirbhar agenda, the country can convert the crises of inflation and a feared recession into an opportunity.

(Authored by Rashmi Saluja, Executive Chairperson-Religare Enterprises Limited (REL), Chairperson and Managing Director-RFL)