Barclays India has projected that India is poised to maintain its status as the swiftest-growing major economy in the foreseeable future. Furthermore, the report released on September 7 suggests that India’s economic policies may pivot towards even more rapid growth following the general elections slated for 2024.
The report, titled ‘India: A breakout moment,’ states, “While 6 percent growth would raise India’s global relevance, targeting 8 percent (growth) could see it overtake China as the biggest contributor to global growth.”
Should India set its sights on achieving growth rates nearing 8 percent, the nation could potentially surpass China as the principal driver of global economic expansion.
Barclays acknowledges that India has consistently outperformed the global average, achieving robust growth while maintaining relatively low inflation levels. The report anticipates that India is well-positioned to sustain a GDP growth rate of at least 6 percent over the next three to five years, all while preserving macroeconomic stability.
Factors underpinning India’s economic vitality include clean balance sheets, substantial foreign reserves, manageable current-account funding requirements, a generally stable inflation environment, and a favorable demographic profile.
Leading up to the upcoming general elections, the Indian government has concentrated its efforts on preserving macroeconomic stability, particularly in terms of managing inflation. Post-election, the report suggests that the new government may aim to rekindle GDP growth to levels previously observed in the early 2000s, all the while maintaining macroeconomic equilibrium.
This ambitious economic growth objective aligns with a broader aspiration to establish India as not only the fastest-growing economy but also the foremost contributor to global growth.
Barclays highlights that since the commencement of the Ukraine-Russia conflict, India’s policy emphasis has been on striking a balance between faster growth and macroeconomic stability. This approach entails an expected moderation in twin deficits, fiscal and current account, and maintaining a relatively stable currency compared to peers.
The report concludes, “We expect this [policy approach] to continue until general elections are held in Q2 2024.”
Despite general elections being regarded as potential risks to the economic outlook, Barclays underscores that solid electoral mandates and a notable absence of significant policy discrepancies concerning growth objectives in India’s political landscape minimize the likelihood of a dramatic shift in policy direction.
