‘India on track to become fastest growing economy in the world’

India is all set to become fastest growing economy in the world, a Finance Ministry review report said on Wednesday.

This report has come at a time when most global agencies have estimated growth to be in the range of 9 to 10 per cent while RBI expects growth to be 9.5 per cent. Earlier, the Economic Survey projected a growth rate of 11 per cent in the current fiscal.

Atmanirbhar Bharat’s role

According to the Monthly Economic Review, prepared by Economic Affairs Department, the Atmanirbhar Bharat Mission encapsulating major structural reforms continues to play a critical role in shaping India’s economic recovery, both through the signalling of business opportunities and expansion of spending channels.

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“Armed with necessary macro and micro growth drivers, the stage is set for India’s investment cycle to kickstart and catalyse its recovery towards becoming the fastest growing economy in the world,” it said.

Ongoing recovery

Further, the report said that rapid vaccination and teeming festivities will push India’s ongoing recovery, resulting in narrowing of demand-supply mismatches and greater employment opportunities.

“India’s economic recovery gathered steam in the festive season, recording a decade high Diwali sales of ₹1.3 lakh crore as per the Confederation of All India Traders. Improving Covid-19 situation amid high business and consumer spirits has delivered sustained economic recovery in October, 2021 as well,” it said.

Global economic growth

The report highlighted that the global economic recovery continues to be impacted by prolonged supply constraints and input cost inflation. However, the IMF, in its October 2021 update, foresees improved global growth prospects at 5.8 per cent in 2021 and 4.9 per cent in 2022 triggering a coterminous global trade growth, by volume, at 9.7 per cent and 6.7 per cent, respectively.

Export performance

World Trade Organization’s October forecast also confirms favourable trade prospects underpinned by resurgence in global economic activity and vaccine dissemination.

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“This augurs well for India’s export performance in the near future, lending credence to IMF projecting India becoming the fastest growing economy, among major countries, in the current and following year,” the report said.

Agri sector stays strong

The agricultural sector continues its strong presence in economic recovery with higher acreage of Rabi sowing, improved reservoir levels, and adequate availability of fertilisers and seeds ensured by the government, the report said.

Sustained rise in agri-exports, growing year-on-year by 22 per cent in April-August 2021, bespeaks government’s commitment to increasing farmers’ income, it said, adding, rural demand remains upbeat with month-on-month improvement in tractor and two and three-wheeler sales in September 2021.

Policy impact

Softening retail inflation and adequate liquidity in the market are also reflected in largely stable G-Sec and corporate bond yields since July 2021, the report added.

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“A more deliberate effort to reduce cost of borrowing is seen in complete pass-through of policy repo cuts as weighted average lending rate (WALR) on fresh rupee loans decline by 130 basis points between February 2020 and September 2021,” it said.

Understandably, it said, RBI’s Monetary Policy Committee in its 33rd meeting during October 6-8 resolved to continue with the extant configuration on the policy rates and its accommodative stance, while deciding to prioritise growth.