The International Monetary Fund (IMF) recently called India a star performer, with India projected to contribute 16 per cent to global growth. The IMF report said India is on track to be one of the fastest-growing major economies in the world. India rebounded strongly from the pandemic, with growth surpassing pre-pandemic levels, despite the headwinds major global economies are facing. The net foreign direct investment (FDI) into the country at $5.9 billion rose to a 21-month high in October 2023, from $1.54 billion in September 2023 and $1.16 billion in October 20222. Foreign portfolio investors (FPIs) too have pumped in $20 billion in 2023, showcasing how investor confidence is touching new highs under the dynamic Modi government. India’s forex reserves, in fact, rose to a handsome $616 billion with foreign currency assets (FCA) at $545 billion for the week ending December 15, 2023. The earlier high was $645 billion in October 2021.
Nada Choueiri, Assistant Director of IMF said, “What we have been observing for quite some time now is that India has been growing at a very robust rate. It’s one of the star performers when it comes to real growth when you look at peer countries. It’s one of the fastest growing large emerging markets and it’s contributing, in our current projections, more than 16per cent of global growth this year.” Choueiri also highlighted the factors that worked in India’s favour, including PM Modi’s massive push for investments in infrastructure and logistics, a growing population, and structural reforms including digitalisation, which Modi has personally been involved in, very passionately.
For instance, the UPI transactions in November 2023 were worth Rs 17.40 lakh crore, marginally higher than Rs 17.16 lakh crore recorded in October 2023. UPI transactions in the country increased at a compound annual growth rate (CAGR) of 147 per cent from 92 crore in 2017-18 (FY18) to 8375 crore in 2022-23 (FY23), with regards to volume. As a result, banknote circulation declined 7.8 per cent in FY23 and UPI logged 85.72 billion transactions in the current financial year till December 11, 2023. UPI transactions in the country alone accounted for 62 per cent of overall digital payment transactions in FY23. The Year-on-Year growth in the value of banknotes in circulation has decreased from 9.9 per cent in FY22 to 7.8 per cent in FY23, which is good news.
India’s economy has rebounded strongly from the pandemic, headline retail inflation has moderated to 4.87 per cent in November 2023, with core inflation at barely 4.2 per cent, while wholesale inflation in November was minus 0.52 per cent. Unemployment has hit a record low of 3.2 per cent in FY23. The financial sector has been resilient, the budget deficit has largely eased, and fiscal buffers are in place with tax revenues being very buoyant. Net direct tax collection in the eight months of the current fiscal touched 58.34 per cent of Budget Estimates (BE) at Rs 10.64 lakh crore. This is 23.4 per cent higher than the corresponding period of last year.
Gross collections, before issuing refunds, grew 17.7 per cent to Rs 12.67 lakh crore in the April-November 2023 period. Refunds amounting to Rs 2.03 lakh crore were issued from April to November of the current fiscal. Likewise, the average monthly run rate of GST revenue in the first eight months of FY24 is a sharp Rs 1.67 lakh crore. GST revenue was a phenomenal Rs 1.87 lakh crore in April 2023 followed by the second highest number of Rs 1.72 lakh crore in October 2023. In November, that number was Rs 1.68 lakh crore. The fact that GST revenues are rising despite GST rates coming down dramatically since GST was first introduced in July 2017, showcases the inherent tax buoyancy of the Indian economy. If comprehensive reforms are implemented, India has the potential to experience even higher growth contributed by additional labour and human capital, IMF stated.
Choueiri emphasised on education, skilling, and increasing female labour force participation. As if on cue, data from EPFO has been extremely encouraging. Speaking of female labour force participation, the Employees’ Provident Fund Organisation (EPFO) added 1.53 million members in October 2023, an increase of 18.22 per cent from a year ago. The data showed that 7.72 lakh members were new joiners, including 2.04 lakh women who were first-time additions to the EPFO. A significant 58.6 per cent of the new members were young employees between the ages of 18 and 25. The EPFO number in September was even better at 1.72 million subscribers. The limited point is this – jobs are being added with rapidity and those including Rahul Gandhi, alleging that ‘Modinomics’ is all about jobless growth, are surely barking up the wrong tree.
Another data point lending credence to the fact that the Indian economy is inherently resilient at this stage can be found in the index of eight core industries (ICI), which grew 12.1 per cent year-on-year in October 2023, following a stellar 9.2 per cent growth in September this year. Over the April to October 2023 period, the ICI showed a rock-solid cumulative growth of 8.6 per cent. In October 2023, coal production grew 16.1 per cent, the second highest pace in at least 12 months, while steel and electricity rose 9.6 per cent and 9.3 per cent, respectively. Natural gas output rose 6.5 per cent, while refinery products were up 5.5 per cent. The core sector constitutes 40.27 per cent of the Index of Industrial Production (IIP) and is hence very relevant.
India’s IIP growth rate rose to an excellent 16-month high of 11.7 per cent in October 2023, driven by the manufacturing sector growing by a steep 10.4 per cent, against a contraction of 5.8 per cent seen in manufacturing in October 2022. Power generation rose by 20.4 per cent in October 2023 compared to 1.2 per cent growth in the year-ago period. Similarly, mining output too rose by a handsome 13.1 per cent in October this year, against only a 2.6 per cent growth in October 2022. As per use-based classification, the capital goods segment grew 22.6 per cent in October this year compared to a 2.4 per cent contraction in the same month a year ago. Consumer durables output in October this year grew by a very healthy 15.9 per cent against a contraction of 18.1 per cent in the same month, a year back. Within IIP, consumer non-durable goods’ output increased by 8.6 per cent compared to a contraction of 13 per cent a year earlier. Infrastructure/construction goods posted a growth of 11.3 per cent against a 1.7 per cent expansion.
The October 2023 IIP data also showed that the output of primary goods logged an 11.4 per cent growth compared to 2.1 per cent in the year-ago period. The intermediate goods’ output in October rose 9.7 per cent against a contraction of 2.3 per cent during the corresponding month last year. Moving beyond IIP, another data point endorsing the strong undercurrent in the economy is data from the OLX Mobility report (previously called the Autonote). Unveiling the transformative trajectory of India’s pre-owned car market, the report projects a meteoric rise in value from Rs 2.1 lakh crore in FY23 to Rs 5 lakh crore by FY28 and a volume increase from 4.6 million units in FY23 to 8.5 million units over the next five years, growing at a volume CAGR of 13 per cent and value CAGR of 18 per cent, respectively. This growth is set to outstrip that of the new car market significantly.
The pre-owned car industry, which stayed strong despite challenges in FY22, saw a significant 14-16 per cent growth in FY23. This growth was driven by factors like the market reopening, a growing preference for personal mobility, and the steep rise in disposable incomes of India’s growing middle class. Equally, the new car market, despite achieving a historic 27 per cent growth in FY23 with 3.9 million units sold, is expected to still grow at a fast-paced 7-9 per cent in FY24, again indicating that the middle class has more income in hand now, than was the case 9.5 years back. For instance, Maruti Suzuki, the bellwether in the car industry and often called the people’s car, is selling an astounding 5 cars every minute. Is that not a vindication of the greater purchasing power of India’s middle class?
Another metric of rising middle-class prosperity is the surge in home sales. As per JLL India, in mid-segment homes, with a ticket size of Rs 50-75 lakh, in the first 9 months of 2023, 45,592 units of these homes were sold. It was followed by 42,919 units of premium homes (between Rs 1.5 crore and 3 crore) and 38,307 units in low-segment homes (below Rs 50 lakh).
Apart from India’s enviable consumption story, some sectors have done phenomenally well. For example, India’s mobile manufacturing is set to surge to $50 billion in FY24 and exports driven by Apple are slated to reach $15 billion.
In a bid to bolster the country’s economic landscape and promote self-sufficiency in manufacturing, the government has been fervently propelling the ‘Make in India’ initiative. Launched in 2014 by Prime Minister Narendra Modi, this campaign aims to transform India into a global manufacturing hub, enticing both domestic and foreign investments across diverse sectors. In the last few years, Make in India, under the aegis of PM Modi, has witnessed a significant degree of success. According to various reports, India assembled over two billion smartphones and feature phones between 2014 and 2022, apart from other electronic gadgets.
The overarching goal of ‘Make in India’ is to foster innovation, promote indigenous manufacturing, and elevate the country’s standing as a formidable player in the global market. The initiative spans numerous industries, including automobiles, electronics, textiles, defence, and renewable energy, among others, fostering an environment conducive to growth and development.
In the last fiscal, a total of $762 billion of exports was recorded. Of this, $453 billion was merchandise exports, and services exports were $309 billion. The picture was not the same 10-15 years ago when the export was led by services export mostly. Undoubtedly, the manufacturing sector has been growing rapidly and Modinomics deserves much credit for ensuring we are not just a services-oriented economy.
One of the pivotal components of Make in India is the emphasis on ease of doing business. The Modi government has implemented several reforms and policies to streamline bureaucratic processes, reduce red tape, and facilitate a more business-friendly environment. This strategic approach has not only enticed foreign investors but has also encouraged local businesses to expand their operations, fostering job creation and economic growth. The Make in India initiative has been instrumental in nurturing innovation and entrepreneurship through initiatives like Start-up India and Skill India. These programmes aim to empower and support start-ups and skilled workers, cultivating a conducive ecosystem for budding entrepreneurs and skilled professionals to thrive. Additionally, the initiative has placed a significant focus on the manufacturing sector’s technological advancement and upskilling the workforce to meet global standards.
The Covid-19 pandemic highlighted the significance of self-reliance, prompting the government to further strengthen the Make in India initiative. Initiatives like the Production-Linked Incentive (PLI) scheme across various sectors have been introduced, providing substantial incentives to domestic manufacturers, thereby boosting local production and reducing dependence on imports. Moreover, the Aatmanirbhar Bharat campaign, launched in the wake of the pandemic, aligns seamlessly with the Make in India initiative. It emphasises reducing reliance on imports, fostering domestic manufacturing, and promoting the consumption of locally-made products. Thanks to Prime Minister Modi’s visionary approach, India is today home to the world’s third largest start-ups, with over 98,000 start-ups and 111 unicorns. Zepto became India’s 111th unicorn.
Goods and services procurement through the government e-market (GeM) portal is also making giant strides, with sales poised to reach Rs 3.5 lakh crore by the end of this fiscal year, compared to Rs 2 lakh crore in the previous year, driven by heightened buying activities across ministries. The 245 central public sector undertakings (CPSEs) account for 63 per cent of the gross merchandise value (GVM) of GeM-related sales.
Speaking of India’s GDP, real GDP or GDP at constant (2011-12) prices in Q2 2023-24 (FY24) attained a level of Rs 41.74 lakh crore, as against Rs 38.78 lakh crore in Q2 FY23, showing a growth of 7.6 per cent as compared to 6.2 per cent in Q2 FY23. Nominal GDP or GDP at current prices in Q2 FY24 attained a level of Rs 71.66 lakh crore, as against Rs 65.67 lakh crore in Q2 FY23, showing a growth of 9.1 per cent. GDP at constant (2011-12) prices in April-September 2023-24 (H1 FY24) attained a level of Rs 82.11 lakh crore as against Rs 76.22 lakh crore during the corresponding period of the previous year, showing a 7.7 per cent growth in H1 FY23. GDP at current prices in H1 FY24 is estimated at Rs 142.33 lakh crore as against Rs 131.09 lakh crore during the corresponding period of the previous year, showing a growth of 8.6 per cent.
The manufacturing sector, which for the past decade has accounted for about 17 per cent of the economy, expanded 13.9 per cent year-on-year in the September 2023 quarter, compared with a revised 4.7 per cent in the previous three months, i.e., the June 2023 quarter. Growth of the construction sector rose by 13.3 per cent, up from 7.9 per cent in the April-June 2023 quarter. Note, the solid 7.6 per cent GDP growth happened despite a tepid 1.2 per cent growth in the agriculture sector and only a 5.8 per cent growth in the services sector. Agriculture was affected by inclement weather and torrential rains leading to massive crop damage in Karnataka, Himachal Pradesh, parts of West Bengal, Bihar and Uttar Pradesh, Uttarakhand, Tamil Nadu and Maharashtra. However, government capex lifted the investment rate to 30 per cent.
Services sectors such as trade, hotels and transport saw a fall in growth from 9.2 per cent in Q1 FY24 to 4.3 per cent in Q2 FY24. Financial, real estate and professional services also saw GVA growth halving from 12.2 per cent in Q1 FY24 to 6 per cent in Q2 FY24, while GVA from public administration, defence and other services moderated slightly from 7.9 per cent in Q1 FY24 to 7.6 per cent in Q2 FY24.
Despite erratic weather and an El Niño event creating a downside to agricultural growth prospects, affecting Kharif output, the fact that manufacturing staged an outstanding comeback in Q2 FY24 is excellent news as it shows that if one part of the economy gets affected due to unforeseen contingencies, the other parts pick up the slack. In H1 FY24, the star performers are undoubtedly construction and manufacturing which grew by a robust 10.5 per cent and 9.3 per cent respectively. The other silver lining is the mining and quarrying sector which grew at 10.0 per cent in Q2 FY24 compared with 5.8 per cent Q1 FY24 and (-) 0.1 per cent a year ago in Q2 FY23.
Consumption demand, as reflected in private final consumption expenditure (PFCE), recorded a slower pace of growth at 3.1 per cent in Q2 FY24 compared with a 6 per cent growth in Q1 FY24. Reflecting this, private consumption expenditure, as a share of GDP, reduced to 56.8 per cent of GDP in the July-September 2023 quarter, from 59.3 per cent in the year-ago period, even as government expenditure increased to 8.9 per cent of GDP from 8.6 per cent in the same period.
The economic recovery is completely on track despite the adverse geopolitical situation which has completely roiled large parts of the world. India, thanks to Modinomics, stands tall. A healthy growth of 11.04 per cent y-o-y in GFCF (a five-quarter high), as against 8 per cent growth in Q1 FY24, suggests a continuation of government CapEx. In the absence of corporate sector CapEx, the government is not only providing the necessary support but also doing the heavy lifting as far as CapEx is concerned, by front-loading its spending. The combined CapEx of the Union and 26 States grew by 26.7 per cent y-o-y during Q2 FY24. GFCE shot up by 12.4 per cent y-o-y (a ten-quarter high), as against a 0.7 per cent contraction in the April-June 2023 quarter (Q1 FY24).
Needless to add, government spending on infrastructure played a big part in the heavy lifting, ensuring growth remained on track. Kudos to the Modi government for ensuring no derailment of growth despite Black Swan events like the Covid pandemic, the Ukraine-Russia War and the Israel-Hamas conflict which affected growth in many other parts of the world.
The best part of Modinomics is the wonderfully seamless manner in which it blends wealth creation with welfarism. Nehru’s failed Fabian socialism dragged India into the depths of poverty. Indira Gandhi’s “Garibi Hatao” was simply a poll plank to delude and fleece gullible voters. Rahul Gandhi’s father, Rajiv Gandhi’s economic model was based on grandiose ideas with zero practicality and no mechanism to execute those ideas effectively. In sharp contrast, Modinomics dreams big and better, still, those dreams are implemented with razor-sharp precision, and the mega Gati Shakti Master Plan is a testimony to that. The ambitious Rs 100 lakh crore Gati Shakti Master Plan to provide multi-modal connectivity to more than 1200 industrial clusters, including two defence corridors across the country is PM Modi’s way of laying a foundation for the next 25 years. Modinomics essentially is not just about the near term but about ensuring sustainability, prosperity and equity for the next many generations and beyond.
The Ayushman Bharat-Pradhan Mantri Jan Arogya (AB-PMJAY) scheme, is the Modi government’s flagship health assurance programme. The scheme provides health coverage of up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation to 12 crore beneficiary families comprising 55 crore individuals. The Modi government has already issued more than 6.1 crore Ayushman cards and authorised more than one crore hospital admissions for senior citizens till date. AB-PMJAY is a public health insurance scheme aimed at ensuring free access to health insurance for low-income individuals in the country.
One of the sterling examples of how Modinomics marries reforms with welfarism is evident from the 10,409 Jan Aushadhi Kendras (JAKs) in India, today, with Rs 25000 crore worth of savings that accrued to the commoner in the last 9.5 years. Medicines sold via JAKs are anywhere between 50-90 per cent cheaper compared to branded medicines in the open market.
Rahul Gandhi’s acolytes and Congress retainers often allege that most of the Modi government schemes were launched when the erstwhile Congress was in power. Well, if that is the case, why was India deprived of the benefits of the said schemes for decades together? Let truth be told–the Jan Aushadhi scheme was launched way back in 2008. But when PM Modi took charge at the helm in May 2014, there were only 34 JAKs. In six years, the Congress established only 34 JAKs, whereas in the last 9.5 years, under Modi’s leadership, 10375 Jan Aushadhi Kendras were established. This is a classic case of how merely launching big schemes is not enough. What is critical is how these schemes are made effective via last-mile delivery to the commoner. And it is in delivery and execution that PM Modi has no match and no parallels whatsoever.
Sanju Verma is an Economist, National Spokesperson for BJP and Bestselling Author of “The Modi Gambit”. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect News18’s views.
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