The vision of the founding fathers has ensured that the Indian economy developed the wherewithal and resilience to weather the storm from time to time. The economy has developed a unique ability to convert challenges into opportunity, be it the food shortage of the 1950 and 1960s that led to the green revolution, the 1962 Chinese aggression that ensured that Indian armed forces acquired the necessary wherewithal, the 1991 balance of payment crisis, that led to far-reaching economic reforms. India weathered 1998 US economic sanctions after the Nuclear explosion or the East Asian currency meltdown or the 2008 global financial crisis and the latest Covid-19 Pandemic. In all these situations, India not only waded through the difficulties but also emerged victorious to put the economy back on the rails and high growth path. As 2022 ends and New Year 2023 dawns, India is certainly in a bright spot among a comity of nations, many of whom are facing severe economic crises.
As we enter 2023, India may remain the top growing economy at 6-7 percent, but two big challenges could pose problems—namely stubborn inflation and sagging exports. Both have the potential to pull down economic growth. Though retail inflation is falling lately, it is still elevated and the geo-political and global situation could reverse it anytime. As it is, food and fuel inflation are still high. Slowing global growth and cooling demand would be two main factors to pull down India’s exports, which showed signs of recovery in the previous quarters. Now the forecast is that India’s goods exports may shrink by more than two percent in 2022-23 and grow by just 1.5 percent, according to CARE ratings research report. India’s merchandise exports had grown 11.1 percent through the first eight months of the year to touch USD 295.3 billion, but the rating agency cited recent months’ trend of moderating exports to reckon that the full-year exports growth would be 2.3 percent lower than the record USD 422 billion achieved in 2021-22. This is not an encouraging situation.
Loans to Indian banks rose 17.5 percent in the two weeks to December 2, 2022, from a year earlier, while deposits rose 9.9 percent. The Indian economy exhibited signs of a gradual strengthening of the growth momentum, drawing from macroeconomic fundamentals, RBI said, adding this had come amid an uncertain global environment caused by globalisation of inflation, energy and food shortages, and synchronised tightening of monetary policy worldwide. The gross NPA has come down to 5.8 percent by March 2022 from close to double-digit four years ago. Another positive development is that the massive investment in infrastructure development has helped to kick-start the economy. With construction picking up there is some surge in employment as well and there are already signs of many companies shifting manufacturing bases from China to India. Overall, the economic picture appears to be mixed for India as it enters 2023 but there are challenges, which need to be addressed on a war footing to ensure that the economy is on an even keel. The Indian economic woes are not insurmountable at the moment and 2023 certainly augurs well for the economy.