World Bank said India will gradually recover to 6.9 per cent in 2021 and 7.2 per cent in 2022The Indian economy was the toast of the world till as recently as 2018.
India was the world's fastest growing major economy between 2014 and 2018 and was predicted to soon be in the same league as China and America.
But things have gone drastically downhill in the past one year.India has lost its coveted title as the world's fastest growing major economy, with the gross domestic product (GDP) growth slipping to a 6-year low of 4.5% in the September quarter.
The International Monetary Fund has attributed the slowdown to a variety of factors, including decline in consumption and fall in investments.China's $14 trillion economy surpasses India's $2.9 trillion economy by about 5 times.
And according to the UN's 2019 World Population Prospects report released in June, India will have more people than China by 2027.
India will have to grow at 8-10% to sustain this huge population.India and China had the same GDP in 1950 and China's GDP per capita lagged countries such as Cambodia, Kenya and Sierra Leone as late as the 1960s.
China witnessed a meteoric rise from the late 1970s to become the world's second largest economy, next only to United States, as the path-breaking reforms initiated by Deng Xiaoping propelled the largely agrarian society to the industrial powerhouse of today.India had to wait for another two decades until the year 1991, for the late Prime Minister P.V.Narasimha Rao and then Finance Minister Dr.
Manmohan Singh to put India on the path of economic liberalization.
The fact that Rao was able to steer the required economic and political legislations through parliament despite heading a minority government and facing resistance from the socialistic and protectionist instinct prevalent in the political and business classes of those times make the achievement doubly remarkable.It is a tribute to the potential of the Indian economy that within a decade of the forces unleashed by Rao-Manmohan duo, India started growing in the region of 6-8 per cent annually - a far cry from the Hindu growth rate of 3 per cent seen in the pre-liberalisation era.
Moreover, the growth momentum was sustained despite the nuclear tests (and sanctions) in 1998 and global financial crisis in 2008.
India was, in fact, the world's fastest growing major economy between 2014 and 2018 before lurching to a 6- year low of 4.5 per cent in the September quarter due to reasons such as financial stress in the rural sector and weak job creation.The slowdown may just be a blip, after all.
The World Bank, in the South Asia Economic Focus, said the country was expected to gradually recover to 6.9 per cent in 2021 and 7.2 per cent in 2022 on the back of an accommodative monetary stance.
And RBI Governor Shaktikanta Das sees the emergence of some green shoots, such as rise in the cost of projects sanctioned by banks and financial institutions, and higher investments in fixed assets by India Inc.The long-term growth prospects also remain encouraging due to young demographics.
By the year 2,027, India will have a billion people aged between 15 and 64, according to a Bloomberg News analysis.
Healthy investment rates and a strong, fast-expanding middle class are positives for the Indian economy.
Reforms such as Insolvency and Bankruptcy Code (IBC) and Goods and Services Tax (GST) also hold immense promise for the long-term prospects of the economy.But if the $2.8 trillion Indian economy has to replicate China's growth story and realise Prime Minister Narendra Modi's ambition of reaching the $5 trillion mark by 2024, the economy will have to see nominal growth of over 12% a year in dollar terms.
Finance minister Nirmala Sitharaman said, while delivering a lecture on 'Indian Economy: Challenges and Prospects' at prestigious Columbia University's School of International and Public Affairs, Prime Minister Narendra Modi's vision of making India a $5 trillion economy and a global economic powerhouse by 2024-25 is "challenging" but "realizable."