As India celebrates its 75th year of independence this year, several roadmaps are being laid for it to become a developed economy in the next 25 years when India would celebrate its 100th year of independence in 2047. Some of us might not be alive to witness it but ever optimist veteran banker K V Kamath, who is chairman of the National Bank for Financing Infrastructure, said recently that he expects India to be a USD 25 trillion economy in 25 years. Presently India is around USD 3.7 trillion economy and recently overtook Britain, India’s colonial masters, to become the fifth largest economy in the world. But India is far behind the topmost economic power, the United States, which is now a USD 26 trillion economy followed by China, a USD 21 trillion economy. India might have come a long way since independence in 1947 from an impoverished to a vibrant economy and is now among the fastest growing economies in the world. But it is still a long way to go to become a developed economy.
The Indian bank’s NPAs situation too has steadily improved. The overall liquidity and lending capacity too is better. But monetary tightening due to inflationary pressure might pose some short-term problems and these are not insurmountable. Digitalisation and India’s efforts to get into hardware manufacturing besides the rollout of 5G technology in telecom offered great prospects for the country to leapfrog in economic development. Infrastructure is still a problem. Corruption, delays in getting clearances, and other logistics and political impediments improve in ease of doing business is a big joke. Many foreign companies still do not consider India to be an investment-friendly destination. However, the slowing down of the Chinese economy, geopolitical situation, and increasing labour costs in China make India an exciting option with its large market and a large pool of trained and skilled manpower with the majority of the 1.4 billion population being youth below the age of 35 years.
The situation is just ripe for India to take off rapidly. India is also a vibrant democracy with a sizable English-speaking population and it also has by and large stable laws with an attractive taxation system and a competent judiciary. These are all big positives but the flip side: Democracy is also a slow process of polity and many multinationals prefer authoritarian regimes as there is a sort of single window and quick clearance despite manifold risks. FDI inflow is likely to cross USD 100 billion for the first time this year. Private investments are looking up with excess capacity vanishing. The global recession may in a way be helpful as it may give that much time to build capacity and fix infrastructure problems. With the twin balance sheet problem behind us which is the balance sheet problem in Indian companies as well as Indian banks, things have started looking up. The two years of Covid had in a way helped the corporates and the banks to deal with the bad loans problems to a considerable extent. These are welcome developments along with several global companies exploring having a second manufacturing hub to ward off supply disruptions.
