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Focus Story

        A Resilient Indian                                                                                                     private investment upcycle.   was enabled by a rebalancing   remittances buttressed the   A confluence of the factors
                                                                                                                                                                                                                 listed above has helped India
                                                                                                                                                                                      current account and
                                                                                                                               The previous decade’s
                                                                                                                                                          of government expenditure.
                                                                                                                               corporate and banking
                                                                                                                                                          Union government capital
                                                                                                                                                                                      prevented it from widening
                                                                                                                                                                                                                 weather these turbulent
                                                                                                                                                                                                                 times. For an extensive
                                                                                                                               sectors’ balance sheet
                                                                                                                                                          expenditure has risen more
        Economy amidst                                                                                                         clean-up exercise has meant   than 5.8X between FY14 and   STRUCTURAL REFORMS     elaboration of these factors,
                                                                                                                               that credit and investment are
                                                                                                                                                                                                                 one may read “The Indian
                                                                                                                                                          FY25 without disturbing the
                                                                                                                                                                                                                 Economy: A Review” ,
                                                                                                                                                          fiscal discipline of the
                                                                                                                               poised for take-off this
                                                                                                                                                                                       IMPLEMENTED IN THE
                                                                                                                                                          government. In the Interim
                                                                                                                                                                                                                 published by the Ministry of
                                                                                                                               decade, as is evident in the
                                                                                                                                                                                       LAST DECADE HAVE
                                                                                                                                                          Union Budget 2024-25, the
                                                                                                                               data – investment as a share
        a Turbulent                                                                                                            of GDP has steadily gone up   government reaffirmed its   BOOSTED INDIA’S         Role of the
                                                                                                                                                                                       PRODUCTIVE CAPACITY
                                                                                                                                                          commitment to the fiscal
                                                                                                                               from a low of 27.3 per cent in
                                                                                                                                                          glide path of reducing the
                                                                                                                               FY21 to 29.8 per cent in
                                                                                                                                                                                                                 Private Sector
                                                                                                                               FY24, while bank credit
                                                                                                                                                          fiscal deficit to less than 4.5
        Global Scenario                                                                                                        growth maintained its      per cent by FY26. This      Just as the reforms of the   in Amrit Kaal
                                                                                                                                                          adjustment was facilitated by
                                                                                                                                                                                      previous decade, such as the
                                                                                                                               double-digit momentum in
                                                                                                                                                          the outcome of important
                                                                                                                                                                                      IBC and the GST, have begun
                                                                                                                               FY24. The Insolvency and
                                                                                                                                                          revenue generation initiatives,
                                                                                                                                                                                      to pay dividends now, the
                                                                                                                               Bankruptcy Code (IBC),
                                                                                                                               implemented in 2016, is
                                                                                                                                                                                      deployment of India’s DPI or
                                                                                                                                                          the Goods and Services Tax
                                                                                                                               helping in speedier resolution   such as the introduction of   development and rapid   The private sector has a
                                                                                                                                                                                                                 critical role to play in our
                                                                                                                               of bad debt and improving the   (GST) regime in 2017. The   India Stack are expected to   journey through Amrit Kaal to
                                                                                                                               credit repayment culture.   GST has stabilised as a vital   fully bear fruit in the coming   becoming a developed
                                                                                                                               Additionally, the government’s   revenue source for central   years. Examples of innovation   economy by 2047. Listed
        T  he First Advance        the aftermath of the                                                                        emphasis on capital formation   and state governments –   based on DPI include the   below are a few key
                                                                                                                                                          gross GST collections have
                                                                                                                               has begun to crowd in private
                                                                                                                                                                                      Open Network for Digital
           Estimates (FAEs) of
                                   pandemic are well-known.

        National Income 2023-24    Smart lockdowns, a rapid                                                                    capex. As per Axis Bank    grown by 11.6 per cent on a   Commerce, which is
        state that India’s real GDP is   nationwide vaccination                                                                Research, capital expenditure   year-on-basis in April-January   democratising e-commerce,
        estimated to grow by 7.3 per   campaign, and fiscal policy                                                             by private non-financial   FY24. The buoyancy of the   the Account Aggregator      PRIVATE SECTOR HAS
        cent in FY24. Various      targeted at poor and                                                                        companies has grown by 23   GST is currently greater than   framework that has the   A KEY ROLE TO PLAY
        high-frequency indicators   low-income households saved                                                                per cent in FY23 and 10 per   1, indicating a widening tax   potential to revolutionise   IN SECURING INDIA’S
        (HFIs) indicate that the   lives, while a calibrated                                                                   cent in H1 FY24. The PLI   base and increasing         investing and credit, and the   ASCENT AS A
        economy is well on track to   monetary policy provided                                                                 scheme has also incentivised   compliance. Apart from being   Digital Document Execution   DEVELOPED
        achieve this growth. This will   adequate liquidity to MSMEs                                                           manufacturers to increase   an important source of     platform of National        ECONOMY BY 2047
        mark three successive years   and saved livelihoods.                                                                   investment, production and   revenue, the GST has also   E-Governance Services
        of growth of over 7 per cent.   Additionally, the considerable                                                         exports. Under the scheme,   helped unify India’s states into   Limited, an Information Utility
        The RBI’s MPC forecasts the   expansion in government                                                                  746 applications were      a single market, thereby    set up under the IBC that   First, central to India's
        Indian economy to grow by 7   capex provided the impetus   A key growth driver of   CAGR of 5.3 per cent               approved till the end of   generating incentives for firms   rapidly completes the loan   economic resilience is the

        per cent in FY25. If achieved,   to investment as a growth   national income is private   between FY12 and FY20.       December 2023, with 176    to scale up while also      documentation of a         delicate balance between
        it would mark four years of   driver, while proactive   consumption. The share of   Additionally, the government’s     MSMEs being direct         reducing logistics costs.   beneficiary. These digital   labour and technology. India
        economic growth at or over   inflation management by the   private final consumption   emphasis on the creation of     beneficiaries. The scheme                              pillars have underpinned the   boasts a vast pool of skilled

        7 per cent since the       government and the RBI     expenditure (PFCE) in GDP   digital public infrastructure        witnessed over Rs 1.07 lakh   External shocks have been   growth of the Indian fintech   and semi-skilled labour, which
        pandemic. These numbers are   ensured that inflationary   at current prices has seen a   (DPI) has been increasing the   crore of investment, leading   the flavour of the season. As   industry. India is among the   serves as a competitive

        impressive as they come    pressures did not surge.   gradual increase from 56.2   economic potential of               to production/sales of Rs 8.7   the world was recovering   fastest-growing fintech   advantage in sectors such as
        against the backdrop of a   However, equal importance   per cent in FY12 to 60.9 per   businesses and individuals.     lakh crore and employment   from the pandemic, successive   markets in the World, hailing   manufacturing, services, and
        slowing global economy and   must be accorded to the   cent in FY24. The resilience in                                 generation of over 7 lakh.  geopolitical conflicts have   as the third-largest growing   agriculture.  Several looming

        geopolitical hostilities and   reforms and initiatives      private consumption                                                                   increased uncertainty and   fintech economy after the   transitions of the times we
        attest to India’s resilience.  undertaken over the six         has been primarily   A SLEW OF                           CAPEX THRUST OF           strained global supply chains.   USA and the UK .      are in will decide how this

                                   years before the                     on account of     GOVERNMENT EFFORTS                    THE GOVERNMENT            Additionally, monetary                                 balance pans out. These
         INDIA'S RESILIENCE        pandemic struck.                      the large        HAVE LAID A SOLID                     HAS CUSHIONED             tightening by central banks   Economic growth has also   include the advent of
                                                                                                                                                                                      generated jobs - the
                                                                                                                                                          also affected external demand.
         HAS HELPED IT TO          These measures have                    domestic        FOUNDATION FOR A                      ECONOMIC GROWTH           While India’s merchandise   unemployment rate has      automation, artificial
         EMERGE AS A 'SWEET        laid the foundation                    consumer base   PRIVATE INVESTMENT                    TO A LARGE EXTENT         exports were affected, its   declined considerably from   intelligence (AI), climate
                                                                                                                                                                                                                 transition-related job losses,
         SPOT' AMIDST              for the economy’s                      and the robust   UPCYCLE                                                        external sector remained    the peaks during Covid times.   etc. These raise concerns
         GLOBAL FLUX               higher potential, the                  increase in per                                                                 remarkably resilient. The   The labour force participation   about job displacement and
                                   fruits of which we

                                   are beginning to see                   capita Gross    The strength in private              In the aftermath of the    increase in India’s services   rate has increased, especially   inequality. It is imperative to

        What factors contributed to   today.                            Income (GNI)      consumption is also helping          pandemic, the government   exports, enabled by, inter alia,   that of women. The   view technology as a
                                                                                          investment. The government
        this resilience? Measures to                                   which grew at a    has reduced compliance               recognised the need for a   the proliferation of Global   employability of India’s youth   complement rather than a

        limit output contraction in                                                                                            counter-cyclical fiscal policy   Capability Centres (GCCs),   has also increased, as shown   substitute for labour.
                                                                                          burdens, simplified laws, and        that generated productive   countered the widening in   in the 11th edition of the
                                                                                          opened up various sectors to         assets. It implemented a   merchandise trade deficit.   CII-Wheebox India Skills
                                                               V. Anantha Nageswaran      private participation, thereby       thrust on public capex that   Additionally, record inward   Report.
                                            Chief Economic Advisor to the Government of India  laying a solid foundation for a
        06   ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY                                                                                                                                               ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY  07
                                                                                                                                                                                                                  QUARTERLY JOURNAL OF ECONOMICS
             FEBRUARY 2024                                                                                                                                                                                                   FEBRUARY 2024
        according to Niti Aayog and   are hesitant to          under Article 6 of the Paris   consider implementing a
        RMI. The move encourages     finance/refinance large-scale   Agreement. It will help   nationwide policy mandating
        manufacturers and project    green hydrogen projects.  create a marketplace for   the use of Green M15 fuel i.e.
        developers to invest in green   •  The production cost of   Indian green fuels like green   mixing 15 per cent green
        hydrogen and its derivatives   various green fuel      hydrogen and its           methanol with petrol, in
        like green ammonia and       technologies, such as green   derivatives, green methanol,   transportation and other
        methanol, putting India among   hydrogen and its       and SAF, among others, in   applicable sectors, supported
        those leading countries, such   derivatives, is higher.   the international market.  by incentives for producers
        as the United States and the   However, grey hydrogen,   •  There’s a need for speeding   and consumers to adopt this
        European Union, which have   alongside various grey    up strategic interventions   fuel. This could be a pivotal
        allocated public funding for   manufacturing methods, has   for the Green Hydrogen   step in India's journey
        green hydrogen.                                                                   towards a greener and more
                                     historically benefited from   Transition Program by
                                     subsidies. Without a robust   offering incentives for both   sustainable future.
        Establishing a market for green   and liquid global carbon   green hydrogen production   •  To ensure widespread
        ammonia and methanol is a    market, pricing the value of   and electrolyser      availability of Green M15 fuel,
        global issue. In India,      carbon and embedded       manufacturing. These       there’s a need for investment
        forward-thinking standards by   emissions in the production   initiatives will catalyze   in the necessary
        the Bureau of Indian Standards,   and usage of grey hydrogen   industry growth.   infrastructure for its
        such as blending DME with    becomes challenging. This is                         production, distribution, and
        LPG and methanol with diesel,   why, initially, green   •  The cost of renewable   storage.
        are significant steps towards   hydrogen seems more    energy can be further
        integrating green fuels.                               reduced through energy   •  Campaigns should be
                                     expensive than grey       surplus banking provisions,   launched to educate the
                                                               especially for sectors     public and other stakeholders
                                   •  The cost of funding remains   mandated to use green   about the benefits of using
                                     a persistent bottleneck,   hydrogen.                 Green M15 fuel and address
                                     presenting a considerable   •  The government should   misconceptions.
                                     challenge for project     implement targeted
                                     developers, impacting the   incentives to boost the   By adopting these
                                     optimization of capital   export of green molecules.   recommendations, India can
                                     expenditure and project   It will help establish India as   make significant strides towards
                                     execution.                                         energy self-reliance,
                                                               a global leader in       environmental sustainability, and
                                                               renewable energy.
                                   Suggestions               •  A mechanism should be   economic growth.

                                                               developed to facilitate   Conclusion
        Challenges                 To address the challenges, we   low-cost financing and
                                                               provide benefits like
                                   suggest that the government
                                   take several steps to provide a   accelerated depreciation   This is the time to take
        Despite government efforts   much-needed boost to the   for green hydrogen      immediate action to overcome
        to promote green hydrogen   industry, such as:         infrastructure investments.  all the bottlenecks on the road
        and its derivatives, the sector                      •  The government should   towards leading the global
        is still in its infancy, and   •  As in the initial days of   expand the FAME India   transition to sustainable energy.
        acknowledging and addressing   renewable energy, the   (Faster Adoption and     With right policies in place and
        the hurdles that impede our   government mandated its   Manufacturing of (Hybrid   the development of a market for
        full potential in this critical   usage through Renewable   &) Electric Vehicles in India)   green methanol and ammonia,
        sector is essential. Among the   Purchase Obligation (RPO).   Scheme to include green   India can unlock the full
        various challenges are -                                                        potential of green hydrogen and
                                     Similarly, we suggest that a   methanol vehicles in it. It   its derivatives. Moreover, it will
        •  There isn’t much existing   quota should be mandated   will not only boost the   provide a much-needed boost
          demand and a developed     for the use of green      market but also provide   for the production, distribution,
          market ecosystem for       hydrogen in sectors like   support to the green    and usage of green hydrogen and
          green hydrogen and its     fertilizers, chemicals, steel,   hydrogen ecosystem in the   its derivatives across sectors.
          derivatives like green     and power generation.     country.                 Such initiatives will not only help
          ammonia and methanol, not   Creating demand through   •  There’s a need for funding   India in achieving targeted
          only in India but also     policy will spur sectoral   and support for research   climate goals but also position it
          globally, compared to other   growth and reduce the   and development in the   as a leader in the green energy
          conventional fuels.        production cost of green   areas of green hydrogen   revolution.
        •  Project developers face                             and methanol-based
          difficulty in getting final   •  Leveraging its international   technologies. It will further
          offtake agreements signed.  relations, the government   help enhance efficiency and
                                     should expedite the signing   reduce costs.
        •  In the absence of advance
          offtake contracts, lenders   of bilateral agreements   •  The government should
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