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With the 2023 World Economic Forum in Davos dominated by discussions of economic growth, or the lack thereof in most developed countries, one nation was often cited as a bright spot.
India is doing “extremely well,” Bank of Japan Governor Haruhiko Kuroda said at a closing panel at the event, while noting the serious challenges facing its neighbors Sri Lanka, Bangladesh and Pakistan.
The nationwide hype was partly engineered, with Indian executives, officials and investment seekers heavily represented at the Swiss mountain resort (although Prime Minister Narendra Modi was not present).
But India shines among the world’s largest economies, with Europe on the verge of a possible recession and a slowdown in US growth.
And while the International Monetary Fund go China outpaces global growth once again in 2023 as the country reopens, its forecast of a 4.4% GDP increase is well below his estimate for India of 6.1%. The Center for Economic and Business Research think India could quickly overtake Germany and Japan to become the world’s third largest economy over the next decade, reaching $10 trillion by 2035.
Several non-Indian company executives at the WEF summit, including Nokia CEO Pekka Lundmark, highlighted India as one of their fastest growing markets.
Ericsson boss Börje Ekholm said 5G infrastructure was developing rapidly there.
“It is for all of digital India and to create a digital society in India,” Ekholm told CNBC. “They’re on a good path with 4G, but now they’re building 5G at an even faster pace.”
India, he continued, “will very soon have the best digital infrastructure outside of China,” powered by the telecommunications giants. Bharti Airtel and Jio added.
“They are being built quickly, that will help India to go digital, and if you compare it to what is happening in Europe, we are behind.”
India also has ambitions to become a global chip manufacturing center, as concerns grow over the West’s dependence on Taiwan; and according to India’s commerce minister, Apple wants to move 25% of the manufacture of its iPhone to the country (although this has not been confirmed by Apple). it’s already a world leader in digital payments; and seeks to develop in areas that include solar, wind and green hydrogen production.
strong tailwinds
“We are very bullish and very positive about India,” Tata Consultancy Services CEO Rajesh Gopinathan told CNBC.
He said that the combination of a stable political environment and significant government investments in infrastructure were providing a positive environment for growth; and that the country was well prepared for the planned energy transition, as it was “building a new element with no legacy infrastructure to build on.”
“The global economy and the size of India have ensured that there is enough capital available,” Gopinathan said. “So, you combine the demographics, the demand side and the availability of capital, I think the advantage is significant. Of course, it has to be executed carefully, but it’s there for realization.”
Despite future commitments on growing renewables and reaching net-zero emissions by 2070, India has benefited from buying Russian oil at a greatly reduced price, while Europe has faced much higher prices, market volatility. market and scarcity fears.
When asked by CNBC’s Steve Sedgwick, Dinesh Kumar Khara, chairman of the State Bank of India, said it was “absolutely” true that India was in a sweet spot compared to its rivals.
He pointed to the country’s vaccine rollout, its measures to rein in consumer price growth that help ensure food security, and its focus on building infrastructure; although he acknowledged that inflation continued to be a “threat” and that it would also affect the country as a drag on global growth.
As Anish Shah, CEO of Mahindra Group, told CNBC: “India will be affected. When the world goes through a recession It’s not like India is left out.”However, he also said: “What we do feel is that the impact on India will be much less due to the inherent fundamentals of the country at the moment, and the fact that inflation in India hasn’t really gone into overdrive. That’s okay. controlled”. .”
not all pink
A 2021 Deloitte report saying India still needs to go much further to build infrastructure and reform systems to improve the ease of doing business and attract more foreign investment.
Some analysts also argue its recent surge in capital inflows—with the Sensex stock index up 5% over the past year, while the US S&P 500—a volatility elsewhere, and could decline as external factors change.
Meanwhile, the country still has one of the highest levels of income inequality in the world, got worse during the pandemic, and poverty persists, although according to one indicator, the poverty rate He fell from 55.1% to 16.4% in the last 15 years.
Suyash Rai, a fellow and deputy director of the Carnegie India think tank, expressed a note of skepticism about much of the Davos optimism.
Hears points that recent GDP growth figures of 6.3% per year 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 excluding government controlled sectors; and that current growth rates are skewed due to the pandemic-related 6.6% contraction in 2020-2021.
It also points out that comparisons between developed and developing countries can be misleading, as the former naturally experience more moderate growth.
Rai told CNBC via email: “While it is true that Union Government capex for infrastructure development has increased, it is unclear whether total public sector capex has increased.”
And on claims of political stability, he replied: “We must not equate single-party dominance with political stability.”
Modi has been prime minister since 2014.
India’s coalition policy era from 1989 until then, Rai said, produced “impressive economic results,” he continued, with per capita income at constant prices tripling over 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.