“Nazar na Lagey Mere India ko! Amid global economic challenges, India shines with a resilient economy. Explore India’s growth story, economic indicators, and the positive impact of falling commodity prices. Witness the strength of the Indian economy, poised for significant growth and development in various sectors. #IndiaEconomicGrowth”
Nazar na lagey Meri India Ko… When many parts of the global economy are in a recessionary mode, India shines like a bright North Star, giving direction to the developed economies about how to frame monetary policies. If we look at India, we find one of the best economies among the emerging economies as well as among developed economies. Inflation has come down significantly, giving relief to the RBI for no further rate hikes. Retail inflation eased to 4.7% in April. Meanwhile, India’s May manufacturing PMI rose to a 31-month high of 58.7, up from 57.2 in April. India’s Q4FY23 GDP rose to 6.1% in Q4, and FY23 clocked a growth rate of 7.2%. Additionally, S&P expects India’s economy to grow by about 6% in 2023/24. The trade deficit in April fell to the lowest in 21 months.
On the other hand, many economies are now bracing themselves for a slowdown. The eurozone, consisting of 20 countries that use the euro as their currency, has encountered a challenging start to 2023. Figures from the EU’s statistical agency, Eurostat, revealed that the region entered a technical recession, with a contraction of 0.1 percent for two consecutive quarters. A country like Australia now has a 50% risk of entering a recession. Falling commodity prices will lead to a significant slowdown for commodity-exporting countries. According to the Food and Agriculture Organization’s price index, food commodity prices have fallen by 22% over the past year. Furthermore, vegetable oil prices have dropped the most, by 48%, reflecting lower prices for palm, soy, rapeseed, and sunflower oils. It is expected that European and US natural gas prices will halve between 2022 and 2023, and coal prices are expected to decrease by 42% in 2023. Hence, many commodities-focused countries will face a significant slowdown. Wage growth and unemployment will increase, putting more pressure on the developed economies.
Among all these, India will benefit the most since falling commodity and vegetable oil prices will bring ease to inflation. With the monsoon season and the festive season to follow, there will be further relief and consumption growth. Household budgets will cool down, providing much-needed relief to spend on other segments of the economy. The halt in interest rates brings relief to EMI-based products and opens up opportunities for planning to buy a new house, car, or other products. These improvements will be reflected in economic growth and various sectors in the coming days.
On the other hand, industrial inflation is also cooling off. Steel, aluminium, and copper prices coming down give immense support for improving the margins and profit abilities of companies. The largest price declines are forecasted for tin and zinc, with drops of 23% and 20%, respectively, in 2023. Most metal prices are expected to fall further in 2024, with price declines ranging from 3% for zinc to 9% for nickel. This will have a bigger impact on the Indian economy, where corporate profits and growth will shoot up in the coming quarter, reflected in the GDP. Industrial consumption will also grow, leading to the growth of ancillary industries followed by the impact on midcap and small-cap sectors. The broader rally of stocks in NIFTY and BSE Sensex is yet to happen, which will gain significant momentum from the above key rationales. We are yet to witness a strong rally in stocks, particularly in those where the movement has been negligible or not very impressive compared to market expectations.
The Indian economy has progressed significantly in the last 10 years when we look back at the growth story of various sectors. The capital market has also rejoiced in this growth, with investors investing in the index. If we look specifically at stocks, we find that many stocks aligned with those sectors have given stupendous returns in all these time frames.
In the last 10 years (2013-2023), we find that:
- The corporate tax rate has been brought down from 33.90% to 22%, which has a significant impact on the profitability of midcaps and small caps.
- FDI investments have grown from $22 billion to $46 billion in 2023.
- RBI inflation has come down, just like a pack of cards, from the level of 10% to 4%, giving immense relief and support to the Indian GDP.
- Corporate debt as a percentage of GDP has come down from 62% to 50%, which has strengthened the corporate balance sheets.
- India’s GDP at the constant price has increased by 93% from Rs 76.5 lakh crore in FY10 to Rs 147.4 lakh crore in FY22.
- The government’s gross tax revenue to GDP ratio has improved to 17.1% in FY22 from 8.2% in FY10.
- The Central government’s tax revenue has witnessed a whopping 303% jump in the last 12 years, from Rs 6.2 lakh crore in FY10 to Rs 25.2 crore (revised estimates) in FY22.
- If we look at the infrastructure segment growth, we will find that in the last 10 years, highway construction has doubled from 25,000 km to 50,000 km, whereas railways achieved a growth of 5 times from 4,000 km to 28,000 km of lines.
- Highway construction in India increased at a 17.00% CAGR between FY16-FY21. Despite the pandemic and lockdown, India constructed 13,298 km of highways in FY21.
- Today, digital business in India has taken center stage for the global economy to invest in.
- Digital transactions as a percentage of GDP have gone up from 4% to 76% in the last 10 years, making it an ocean of opportunity for the Indian economy.
- Today, India contributes around 12% to the Global GDP, compared to half of what it used to do two decades ago.
Nazar na lagey Mere India ko. Keeping consumption and technology aside, India finds its strength from its largest youth population in the world; around 66% of the total population (more than 808 million) is below the age of 35. Furthermore, nearly 40% of the Indian population is aged 13 to 35 years. Even if there is a slowdown in developed economies, the impact on India will be relatively small, given its domestic economic strength. It is not only the GDP growth, but the financial markets will also grow significantly.
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