Although the Indian economy is expected to grow above 7% driven by strong domestic demand and economic reforms, geopolitical risks such as the fallout of Israel-Hamas war pose a risk, according to a Finance Ministry report ahead of the budget.
The Finance Ministry report is bullish on the country’s economic growth trajectory, with the GDP expected to more than double from $3.5 trillion in 2022 to $7.3 trillion by 2030.
As of January 29, the Indian economy is reported to have touched the $3.7 trillion mark, which represents a quantum leap from its position as the 10th largest economy a decade back with a GDP of $1.9 trillion.
The Finance Ministry attributes India’s strong growth amid a global slowdown to a series of economic reforms and massive investments in the infrastructure sector which have had a multiplier effect to propel the economy ahead. These reforms have also strengthened the nation’s economic resilience against unforeseen global shocks.
The government’s investment in infrastructure has seen a substantial increase, rising from Rs 5.6 lakh crore in FY15 to an estimated Rs 18.6 lakh crore in FY24. This investment is part of a broader strategy to sustain and enhance economic growth, which has been robust over the past three years, with a growth rate of over 7 percent.
However, at the same time it also lists some challenges.
The challenges listed for the economy include the threat of job cuts in the services sector posed by artificial intelligence, the trade-off between energy security and economic growth in the context of climate change and the availability of an adequately skilled workforce.
The report states that in an era of an increasingly integrated global economy, India’s growth outlook also depends on the spillover effects of global developments and not just its domestic performance. This is reflected in the hostilities in the Red Sea which has increased shipping costs and delayed trade consignments which have to take a much longer route via the tip of South Africa.
”The government has, however, set a higher goal of becoming a ‘developed country’ by 2047. With the journey of reforms continuing, this goal is achievable,” the report states.
