Despite the shadows of a global economic slowdown, India’s economy is set to surge robustly in 2023, propelled by domestic consumption, investment, and infrastructure development, says a new report from GlobalData. Even as the specter of weakening external demand threatens to dampen trade prospects, India’s growth trajectory remains robust, pegged at an enviable 5.7%—a slight deceleration from the 7% high of 2022.
According to GlobalData’s “Macroeconomic Outlook Report: India,” Q1 2023 saw India’s GDP soar by 6.1% annually, an upswing from the previous quarter’s 4.5%. Private spending surged to 2.8% and public expenditure bounced back to 2.3%, while gross fixed capital formation jumped to 8.9%.
The momentum is expected to carry on through Q2 and Q3 2023, powered by private consumption buoyed by a resurgence in rural demand and a surge in manufacturing activity. The Indian economy’s resilience owes a lot to its robust domestic consumer market, according to Maheshwari Bandari, Economic Research Analyst at GlobalData.
However, high fuel prices continue to weigh heavy on households and businesses. Still, they are anticipated to remain steady in the next quarter as oil marketing companies seek to recover losses from periods of high crude prices.
On the sectoral front, financial intermediation, real estate, and business activities were major contributors to the gross value added (GVA) in 2022, trailed by mining, manufacturing, and utilities, and then agriculture. These sectors are predicted to grow by 11.8%, 11.7%, and 11.7% respectively in 2023.
In a positive development, the Indian government plans to hike capital expenditure by 37.4% to $121.9 billion, providing a substantial boost to the construction and related industries.
Another piece of good news for the Indian economy in 2023 is the discovery of vast lithium reserves in Rajasthan. This discovery could satiate 80% of India’s lithium demand, and pave the way for India’s self-sufficiency in lithium production—a critical component in the shift towards green energy.
Internationally, though, India’s export contraction for the fourth consecutive month and a $22.1 billion trade deficit raise concerns for the economic recovery and the current account deficit. However, optimism for a rebound is in the air, with US tech behemoths like Amazon, Google, and Microsoft announcing significant investments during Prime Minister Modi’s US visit in June 2023.
Even with a slight dip in FDI, the substantial investments pledged by these tech giants, alongside the burgeoning Indian startup ecosystem, are poised to propel job creation, accelerate digitization, and potentially boost GDP growth in the upcoming quarters.
Despite certain challenges, GlobalData’s Country Risk Index (GCRI Q1 2023) classifies India as a manageable-risk nation, ranked 56th out of 153 nations, with a lower risk score in macroeconomic, political, and legal parameters when compared to the world average.
Bandari sums it up: “India’s startup ecosystem has seen tremendous growth, with an influx of capital and investor confidence paving the way for innovation, job creation, and sustained economic growth.”
