Economic Prospects For India in 2022

India crossed 1.40 billion in population on Christmas Day 2021.At these levels, population is a definite drag on progress, putting pressure on resources natural and monetary. Any amount of growth is contending with a birth every second, even if we don’t like our babies trafficked by unscrupulous elements in our midst. This is followed by a death in every three seconds. We are slowing the rate of population growth, but the juggernaut will still be unrelenting (taking us to 1.70 billion), for the best part of this century. However, to be the fastest growing economy in the world is both a saviour and no small thing. But other rich countries have ‘stable’ populations that haven’t grown in decades. They don’t have or particularly need our economic growth rates to live a prosperous life in the main.

 To grow faster we need economic reform. And the good thing about economic reform is that it can rarely be reversed. It provides benefits and opens vistas. The country’s response to the global desire to relocate here instead of China has already begun to prove economically beneficial. It brings in new technology and expertise, and provides fresh employment.

The prospect of a high-end semiconductor industry being established in India is  most encouraging. Pledges from large business houses are in unprecedented tens of thousands of crores, apart from the government facilitations and incentives, start-ups and design studious.

Various IPOs supporting the new Start-Ups and Unicorns are new avenues for growth. Though a long way behind America and China, India has become the third biggest unicorn generating country. Divestments of government owned enterprises are also growing our stock and debt markets northwards of $ 3 trillion.

Likewise, an Aatmanirbhar and joint-venturing Defence manufacturing and space satellite/missile making industry, growing rapidly, will transform our economic and strategic capabilities. In fact, in many of these new areas, initial estimates of contribution and growth may well be overtaken.

This government’s impressive efforts in modernising and creating new infrastructure, electrical power, mining and mineral production, alternative energy, 5G connectivity on the anvil, all contribute in real terms to the ease of doing business. They contribute to improved logistics and connectivity. The same applies to modernised railway systems, new city metros, sea transport, better airport infrastructure. Digitisation has grown at such a pace that it is unmatched by other countries in both size and scale.

Improved agricultural infrastructure, seeds, fertilizers and practices at various states are not only resulting in better farmer incomes, but fostering exports at a new level of growth.

The impact of dynamic diplomacy has improved our security and opened up joint venture cooperation with several countries. India has become, perhaps for the first time, a truly favoured destination, aided and abetted by the leading nations of this world in every region.

There are optimistic forecasts of GDP growth in fiscal 2022, ranging from the prime minister’s advisory council’s 7.5%, to 9.1% (Goldman Sachs) and 8.5% (IMF). This is most welcome after successive waves of the paralysing and expensive Covid pandemic and its variations. Omicron is not yet done with.

Different prescriptions are being offered to the government, some say raise interest rates, others advocate boosted capital expenditure. Is inflation from high fuel prices a persistent threat?

It is common sense to expect a surge from sectors such as real estate, hospitality, aviation, all brought to a near standstill during successive lockdowns. Real estate, fuelled in part by black money, is also the second largest employer.

Not much focussed on, is the advent of a series of assembly elections in five states in 2022. And then some more in 2023, before the general elections in 2024. These will all result in large expenditures and consumption led growth.

The IMF is very bullish on India, with its Chief Economist Gita Gopinath moving up to Deputy Managing Director this year. Gopinath expects a rush of FDI investment, for India’s political stability, fiscal responsibility including repayment of loans on time, and massive demand projections. Of course, India’s successive Union Budgets and legislation must support the process and keep up the momentum. The World Bank is similarly positioned.

The fact is, India should be experiencing double-digit growth year-on-year for several going forward. The reason this remains elusive is because of an ideological undertow in bureaucratic and political quarters that is suspicious of economic reform. This government has consistently tried to balance its reformist and economic growth inducing moves with massive poverty alleviation schemes. Still, we have put some of the over-staffing, inefficiency, price controls, subsidies, non-mechanisation, losses, shortages of essential goods and services, the licence-permit Raj, behind us.  

But obtuse trade unionism is very much with us. They are, when financed by the Left, ranged against bank merger and privatisation, PSU divestment as in Air India, dilution of the government’s stake in large state enterprises such as the LIC. These forces do not want loss-making BSNL sold off. They don’t want labour or land reform.

The judiciary, in dire need of reform itself, supports most leftist and status quoist positions. It tacitly supported the Farmer protests that successfully blocked reform favouring the small and marginal farmers. The judiciary has successfully blocked its own reform even as millions of cases await judgement.

China and Pakistan do not want to let India make progress. They are aided by anti-national forces supported by foreign Islamists, Church funds, Chinese/Leftist monies, insurgents, terrorists, Maoists, separatists, certain opposition political parties. Democracy itself and the Indian Constitution are being twisted to suit a bizarre break-India narrative.

These forces combined, want to see India under expensive military pressure on its borders. They help by also creating broad-based domestic unrest on an elevated basis. It is, as if, the more the economic progress India makes, the more these people intensify their efforts.

So, even as all economic logic dictates that India is bound to march onwards and upwards, it cannot do so smoothly without confronting and vanquishing the negative forces that besiege it. This will need resolute administration and the continued electoral support of the majority of the Indian people.

A key point of departure viewed both as a positive by many and a negative by those opposed, is that this government is strongly and unabashedly Hindu nationalist. It is rapidly creating new political and cultural narratives.

The sizeable 200 million Muslims of India are worried about their erstwhile position of privilege. This, even though their level of education is at an abysmal 2% of their number. How can they hope to grasp at the benefits that flow from education beyond the madarasa? Other minorities, such as the Christians and now the Khalistani Sikhs too, have taken a petulant stance. They all fear Hindu domination. Restrictions being placed on induced or forced conversion is also bothering them.

And yet, internationally, India is regarded, admiringly,  as a wise and peaceful Hindu country despite its secular pretensions. There seems little chance of a threatened majority, irked by aggressive minorityism, backing down any time soon.

A new reality is being engineered. All Indians will have to find their own place in it.  This too is grist to the economic mil and the sooner people fall in line the betterl.  As for China and Pakistan, things are likely to come to a head in the near future. And when they do, should India prevail militarily, as it is expected to by many strategic think-tanks, it will enter a new trajectory, unfettered by the Sword of Damocles hanging over its head.

The writing on the wall is that the bulk of the international community, despite shrill condemnation from certain fringes, is more than willing to do business with India. After the jolt that many have received from China based losses, the sincerity of the Indian offers are being appreciated.

The numbers projected in any economic assessment and forecast always speak of a potential. But it is the determination of the government to see it through that counts both in the short and long term.

 Progress in a democracy as raucous as ours, cannot be a cakewalk. Opposition has to be ground down over time. However, we have already received the transformative benefits of bold policies for three decades since 1991.There is a broad consensus in favour of modernisation, infrastructure and economic reform, that will take this country to the kind of maximum prosperity possible for a people so numerous.    

(1,392 words)

December 29^th, 2021

For: The Sunday Guardian

Gautam Mukherjee