Editorial 1 : Cautious optimism
Introduction: Last year, the Indian economy fared better than expected. In its most recent World Economic Outlook, the IMF has upped its growth projections for the country. There are expectations of the growth momentum continuing this year as well.
Various growth predictions of the Indian economy
- The National Statistical Office’s second advance estimates have pegged growth for the full year at 7.6 per cent.
- As per the International Monetary Fund’s Regional Economic Outlook report, India has been a “source of repeated positive growth surprises”.
- The IMF now expects the Indian economy to grow at 6.8 per cent in 2024-25, up from its earlier projection of 6.5 per cent.
- The Reserve Bank of India is more optimistic.
- In the last monetary policy committee meeting, the central bank had projected growth at 7 per cent.
- The Asian Development Bank has also upped its estimate of growth this year to 7 per cent.
- The World Bank has pegged the economy to grow at a marginally lower rate of 6.6 per cent in its recent South Asia Development update.
- Rating agency Crisil expects growth at 6.8 per cent, while ICRA is less optimistic at around 6.5 per cent.
- This range of GDP growth estimates from 6.5 to 7 per cent does suggest that the Indian economy is likely to remain the fastest growing large economy in the world.
Reasons for an optimistic Indian growth
- There are several reasons to be optimistic about the country’s growth prospects.
1. Above normal Moonsoon
- As per the India Meteorological Department, the southwest monsoon this year is “most likely to be above normal”.
- There is a 60 per cent chance of La Nina conditions developing by June-August as per the most recent update from the US National Oceanic and Atmospheric Administration.
- A good monsoon would bode well for food production, and, as a consequence, possibly provide a fillip to rural demand.
2. Pick-up in private investments
- There are also expectations of a firm pickup in private investment activity as capacity utilisation rates rise.
- Both bank and corporate balance sheets are healthy — bank non-performing loans fell to 3.2 per cent in September 2023, while the corporate debt-to-equity ratio has fallen from 1.16 in 2014-15 to 0.85 in 2022-23 as per a report from Nomura.
3. Government’s capex push
- There is a possibility of government capex slowing down in the first few months of the year due to the elections. But it will eventually drive the economy.
- On the trade front, while the IMF does expect world trade volume in both goods and services to pick up, uneven global growth and geopolitical conflicts do create uncertainty.
What are the concerns regarding growth?
- There are several sources of concern.
- As per the IMF, growth in the global workforce will be driven by India and sub-Saharan Africa, with these regions accounting for “nearly two in every three entrants over the medium term”.
- Creating more productive forms of employment opportunities for the millions entering the labour force each year should be a top priority for the next government.
- Alongside, it must also commit to the path of fiscal consolidation and bring down its debt.
Conclusion: It has fared better than expected and the momentum is likely to continue. However, concerns, especially over jobs, remain.
Editorial 2 : The new productive force
Introduction: Although the next government’s hands would be full to deal with many geo-political complications, it will have to focus on a wide range of internal reforms to make India ready to gain command over emerging technologies.
China’s Deep Tech Push
- The Chinese government is launching a major push to develop new technologies, hoping to surpass the US and become the world's leader in science and technology.
- This "new productive forces" campaign is seen as a key part of China's plan to become the world's dominant power.
- The concept of "productive forces" comes from communist theory and refers to the technology used in production.
- President Xi Jinping announced this initiative last year and it's been a major focus since then.
- China wants to move away from being a cheap manufacturing center and become a leader in areas like electric vehicles, space exploration, and artificial intelligence.
- While China has made progress in some areas like solar panels, they still lag behind the US in many crucial technologies.
The West is investing big
- The new obsession with technology policy is not limited to China; the question of mastering the technological revolution animates all major economies.
- In the last few years, President Joe Biden has focused intensely on regaining its leadership in the advanced technology sectors.
- The Biden administration successfully mobilised bipartisan support in the US Congress to pass three pieces of legislation — the Infrastructure Investment Act, the CHIPS Act, and the Inflation Reduction Act.
- Together, they form a muscular industrial policy — long taboo in the US economic discourse — aimed at renewing American leadership in advanced technologies.
- It has also sought to limit the support of US capital to Chinese technological development and restrict advanced technology exports from the US and its allies to Beijing.
- The US is also trying to develop new global technology coalitions with its friends and partners, including the Quadrilateral forum with Australia, India, and Japan, and the so-called Chip-4 alliance between the US and three leading semiconductor producers — Japan, South Korea, and Taiwan.
- It is also building deep bilateral partnerships in critical and emerging technologies with India (the iCET).
- In a major speech at the Sorbonne University in Paris last week, French President Emmanuel Macron talked of the urgent need for Europe to reclaim a major spot in the distribution of global technological power.
The task for India – beyond manifestos
- In India, science and technology have long been a major part of its developmental strategy.
- Over the last decade, we have seen Prime Minister Narendra Modi leverage digital technologies for the delivery of services, emphasise investments in renewable energy, focus on a mission mode to put India back on the map of semiconductor production, and develop a strategy for the acceleration of India’s AI capabilities.
- Technology has also figured prominently in the Modi government’s foreign policy — especially in making it a key element of building strategic partnerships with the US and Europe.
- The BJP election manifesto has a section on technology and innovation that promises, among other things, to make India a leading space power, promote a robust national research and development (R&D) infrastructure, set up a research fund, and launch a new mission for quantum computing.
- To keep pace with the new global race for mastery over the “new productive forces”, though, Delhi needs to undertake a sweeping overhaul of its technology departments, significantly raise the national expenditure on R&D, and encourage greater participation of the private sector in the research, development, and production of modern technologies.
Conclusion: Modernising the technological foundation of the Indian economy and national security must necessarily be at the top of the agenda for the next government if Delhi wants to be a part of the global map of “new and high-quality forces of production”.