India’s macro picture drawn on the canvas of leading economic indicators, including those affecting day-to-day life of a common household, looks far brighter and importantly more focussed than it was three years back when Narendra Modi took over as the Prime Minister, riding on his personal popularity and connect with the people.
At 7.1 per cent Gross Domestic Product (GDP) growth, India is expanding at the fastest clip among the major economies of the world, even ahead of China which acted as the powerhouse of the global economy for well over two decades . The 7.1 per cent growth is certainly not enough to solve all our legacy problems of poverty, unemployment and meeting aspirations of a young India, but it has brought about a great stability to the economy, that can now take the next leap to 8-9 per cent. It is thanks to this stable environment, coupled with some path – breaking reforms like the Goods and Services Tax, that the global investor is looking at India with a lot more interest now than in 2013-14 , the period marked by low confidence level of both consumer and investor.
The key differentiator is the hope of a still higher and sustainable growth, for which the missing links are being found with a great sense of urgency and sincerity. The Reserve Bank of India has been given a legislative back-up to fix the problem of bad assets in the banks and kick-start the investment cycle again in the private sector, while the government is front-loading all its expenditure on critical infrastructure like highways , ports, railways and power distribution. As much as Rs four lakh crore have been committed to infrastructure spend in the current year’s Budget. The combined impact, helped by the impending GST roll- out should then take the growth further up by at least two percentage points with more visible and positive spin-offs.
Both global and local investors are pumping in hordes of cash both into the debt and equity market, taking the market capitalisation of the Indian stocks over USD two trillion, almost the size of our economy. Add to it, the record foreign direct investment of USD 60.08 billion in 2016-17, against USD 36.05 billion in 2013-14, we get a robust inflow from overseas with the result that the RBI is left with surplus of hard currency with all-time high level of foreign exchange reserves of USD 375 billion, as on May 12,2017 , against USD 313 billion in the same month of 2014 The rupee, in the process, is sitting merrily at its strong position, though exporters are not amused about it. With India being net importer, a stable and strong rupee helps the country in terms of lower prices, which in any case have been greatly helped by about halving of the crude oil prices in the international market. Against the present level of Indian basket of crude oil prices of USD 52-53, a barrel of the same was costing us USD 108 way back in May 2014. That is a big boon for our economy, no doubt about it!
One of the key indicator how the economy is doing from the point of view of a common household is inflation, more so at the retail level which is measured by the Consumer Price Index. The CPI was growing by 8.28 per cent in May, 2014 ; at specific level of items of use to common households. The prices for vegetables were rising by 15.25 per cent, fruits by 23.17 per cent, ,cereals and products 8.81 per cent, egg, fish and meat 10.11 per cent and food and beverages 9.40 per cent.
Fast forward to the latest data of April, 2017. The annualized CPI inflation is 2.99 per cent ; almost one-third of 2014 level. Prices for cereals and products are now rising by 5.06 per cent, meat and fish 1.99 per cent,, egg 3.44 per cent, milk and products 4.74 per cent, pulses minus 15.94 per cent, food and beverages 1.21 per cent and , fruits 3.78 per cent.
The real per capita income, after adjusting inflation, was Rs (at 2004-05 prices) was estimated at Rs 39,904 during 2013-14; which has more than doubled to Rs 82,112 (at 2011-12 prices) for 2016-17.
The indicators apart, the notable feature of the Indian economy at this point in time is the hope of a further momentum that will come from several policy initiatives along with direct spending programmes on expansion of the Railways which has already invested more than Rs 3 lakh crore into building and expanding infrastructure in the last three years, besides modernising it as the most reliable and safe mode of transport of goods and passengers.
Empowerment of those left out of the main economic stream through world’s largest financial inclusion programme of Jan Dhan Yojana, by giving bank accounts to 28 crore additional people, would be throwing new opportunities for businesses to tap those sections of the society which never interested them earlier.
To be fair to it, it is the telecom sector which has played a catalyst role and the ongoing Digital India drive would expand and strengthen the Aam Admi in a holistic manner;. After all, the economy should not only be seen to be growing, it should be seen to be benefitting the people. The same should be happening across different sectors with the rural-urban divide disappearing with development of communication and transport infrastructure.
At this point in time, the Indian economy is rock steady, measured on macro indicators and should be ready for a further lift up with the help of policy initiatives and an uptick in global sentiment. Moreover, the rain Gods are expected to be obliging us again this year. That may build on our record foodgrains production of 273 million tonnes for 2016-17; although the farm sector would continue to require some heavy lifting by the Centre and the states.
*The Author is New Delhi-based senior journalist writing mostly on political-economic issues.