SOCIO-ECONOMIC VOICES

"India's Share in Global GDP Increases at Fast Pace"
-Dr. S P Sharma,Chief Economist, PHDCCI

Despite the pandemic impact, recent global headwinds such as Russia-Ukraine war and inflationary pressures, India will be able to increase its share in global GDP from 3.3% in 2021 to 4.1% in 2028; this indicates India's increased lucrativeness in global charts. The Indian economy is expected a GDP size of $ 4trillion in 2024 with a per capita nominal GDP around $2800.

Over the last three years, the global economy has been navigating successive high-amplitude shocks: the COVID-19 pandemic waves; protracted geopolitical hostilities; rapid monetary policy tightening; and the recent banking turmoil. Despite these heightened uncertainties and formidable headwinds, the Indian economy has made a solid recovery and is among the fastest growing large economies.

India is constantly growing above the pre - pandemic level of GDP growth, showing its strong resilience during the post pandemic and recent geo–political developments. According to the recent IMF data, India recovered significantly from (-) 5.8% GDP growth in 2020 to 9.1% in 2021 and 6.8% in 2022 with projected growth rate of 5.9% in 2023. The growth rates for 2021 to 2028 are significantly above the growth rate of 3.9% posted in pre-pandemic year 2019. India has proven its resilience not only by sharply recovering from the pandemic years, but also consistently growing in the high trajectory in the post pandemic years. Going ahead, India's growth rates for the next six years (2023-2028) are significantly above the top 10 leading economies and overall world economic growth.

World economic growth had recovered sharply in 2021 at 6.2% from a low of (-) 2.8% in 2020, however, world economic growth again decelerated to 3.4% in 2022 and projected to decelerate further at 2.8% in 2023 and 3.0% in 2024.

According to the recent IMF data from 2019 to 2028, the GDP analysis the top ten countries shows that India grows fastest as compared with the top 10 leading economies. India was a growth leader with a 7.9% GDP growth (average2021-2022) followed by China at 5.7%. Going ahead, during the period (2023-28) too, India will be a growth leader among the top ten economies with a growth rate of 6.1% (2023-28 average) followed by China with a growth rate of 4.1%, which is significantly below by 2 percentage points.

GDP growth rates of the leading economies (2019-2023)

Year World United States China Japan Germany India UK France Italy Canada South Korea
2019 2.8 2.3 6.0 -0.4 1.1 3.9 1.6 1.9 0.5 1.9 2.2
2020 -2.8 -2.8 2.2 -4.3 -3.7 -5.8 -11.0 -7.9 -9.0 -5.1 -0.7
2021 6.2 5.9 8.5 2.1 2.6 9.1 7.6 6.8 7.0 5.0 4.1
2022 3.4 2.1 3.0 1.1 1.8 6.8 4.0 2.6 3.7 3.4 2.6
2023 2.8 1.6 5.2 1.3 -0.1 5.9 -0.3 0.7 0.7 1.5 1.5
2024 3.0 1.1 4.5 1.0 1.1 6.3 1.0 1.3 0.8 1.5 2.4
2025 3.1 1.8 4.1 0.6 2.0 6.2 2.2 1.9 1.2 2.2 2.3
2026 3.1 2.1 4.0 0.5 1.8 6.1 2.0 1.8 1.1 1.9 2.3
2027 3.0 2.1 3.6 0.4 1.2 6.0 1.8 1.6 1.0 1.7 2.2
2028 3.0 2.1 3.4 0.4 1.1 6.0 1.5 1.5 0.9 1.7 2.2
Average (2021-2022) 4.8 4.0 5.7 1.6 2.2 7.9 5.8 4.7 5.3 4.2 3.4
Average (2023-2028) 3.0 1.8 4.1 0.7 1.2 6.1 1.4 1.4 0.9 1.7 2.2
Source: PHD Research Bureau, PHDCCI, Complied from IMF, World Economic Outlook, April 2023

Considering the share of the leading economies in the global GDP, the difference between 2021 and 2028 shows that China will be able to add 2 percentage points in its global share followed by India with an addition 0.8 percentage points, Brazil with 0.3 percentage points. However, the other economies are projected to lose their share in global GDP including Germany at (-) 0.7, France at (-) 0.6, Italy at (-) 0.4, USA (-) 0.2, United Kingdom (-) 0.1. Overall China and India will be the only two economies which are projected to enhance their share in global GDP.

The growth forecasts for India by various prestigious organizations are promising. The Plethora of structural reforms undertaken during the last many years have not only rejuvenated the Indian economy from the daunting impact of coronavirus but also strengthened the economic fundamentals to cope up the recent geo- political developments.

Indian Economy So Far

Year Breathe of the Economy GDP Growth
2019-2020 Cyclical downturn 3.9%
2020-2021 Historic lows caused by coronavirus -5.8%
2021-2022 Sharp recovery/Economic consolidation 9.1%
2022-2023 Economy resumes normal growth curve 7.2%
2023-2024 Economy consistently resilient 6.8% - 7.3%
Source: PHD Research Bureau, PHDCCI, July 2023.

The performance of key economic and business indicators reflects that the Indian economy has resumed its normal growth trajectory and economy is poised to enter a new growth orbit invigorated by unrelenting support by the Government, RBI and Industry. The economic growth trajectory is expected to be stronger in the coming years on the back of various reforms undertaken by the Government during the last three years. The reforms have laid a strong foundation for a higher growth trajectory in the times ahead.

India's Size of the Economy and GDP per capita

Year Size of the Economy (US $ Billion) GDP Per Capita at Current Prices
2021 3150 2234
2022 3386 2379
2023 3736 2601
2024 4062 2802
2025 4403 3011
2026 4765 3231
2027 5153 3465
2028 5575 3720
Source: PHD Research Bureau, PHDCCI, compiled from World Economic Outlook, April 2023, IMF.

According to the recent IMF estimates, India’s size of GDP projected to reach more than USD 4 trillion by 2024 and USD 5 trillion by 2027. Accordingly the per capita income will increase from USD 2601 in 2023 to 2802 in 2024 and 3720 in 2028.

The pace of economic activity is expected to remain strong on the back of various structural reforms undertaken by the Government during the last 3 years. Continued economic reforms will further strengthen the economic fundamentals of the country to maintain high economic growth trajectory in the coming years. Strengthening of India's connectivity with Global Value Chains (GVCs) will help to improve supply side bottlenecks, reduce costs of doing business and address inflationary pressure. Enhanced competitiveness of the Indian economy will attract more and more investments and create more employment opportunities for the growing young population in the country.

Going ahead, we need to focus more on the manufacturing sector, recently, high cost of borrowings, high prices of raw materials have impacted the price–cost margins of the producers. More grounded ease of doing business with robust single window clearance systems will reduced costs of doing business and ease compliances. These reforms will strengthen the growth trajectory and India's brightness in the global eco system.

(Dr. S.P. Sharma is Chief Economist & Director of Research • PHDCCI (PHD Chamber of Commerce and industry, India)

Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of Indiastat and Indiastat does not assume any responsibility or liability for the same.

indiastat.comJuly, 2023
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Anubha Srivastava, Ph.D., UGC NET, M. Com, CertIFR (ACCA)

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