Page 7 - CII ARTHA India’s Growth Prospects

Focus Story

A Resilient Indian private investment upcycle. was enabled by a rebalancing remittances buttressed the A confluence of the factors
current account and
listed above has helped India
The previous decade’s
of government expenditure.
prevented it from widening
corporate and banking
Union government capital
weather these turbulent
expenditure has risen more
sectors’ balance sheet
significantly.
times. For an extensive
Economy amidst clean-up exercise has meant than 5.8X between FY14 and STRUCTURAL REFORMS elaboration of these factors,
that credit and investment are
FY25 without disturbing the
one may read “The Indian
poised for take-off this
Economy: A Review” ,
fiscal discipline of the
2
IMPLEMENTED IN THE
decade, as is evident in the
published by the Ministry of
government. In the Interim
LAST DECADE HAVE
Finance.
data – investment as a share
Union Budget 2024-25, the
a Turbulent of GDP has steadily gone up government reaffirmed its BOOSTED INDIA’S Role of the
PRODUCTIVE CAPACITY
from a low of 27.3 per cent in
commitment to the fiscal
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
previous decade, such as the
adjustment was facilitated by
double-digit momentum in
the outcome of important
FY24. The Insolvency and
IBC and the GST, have begun
revenue generation initiatives,
to pay dividends now, the
Bankruptcy Code (IBC),
implemented in 2016, is
the Goods and Services Tax
helping in speedier resolution such as the introduction of development and rapid The private sector has a
deployment of India’s DPI or
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
Open Network for Digital
gross GST collections have
has begun to crowd in private
considerations.
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 . 1 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
also affected external demand.
generated jobs - the
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

National
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
https://finnovating.com/fintech-global-vision-report/
1
2 https://dea.gov.in/sites/default/files/Monthly%20Economic%20Review%20December%202023.pdf
06 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 07
QUARTERLY JOURNAL OF ECONOMICS
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
hydrogen.
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.
hydrogen.
• 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