The period from 2014 to 2024 marks a significant chapter in India's economic history, characterized by substantial growth and development across various sectors, though many challenges remain. For example, youth unemployment and poverty levels remain high by international standards.
This article aims to explore the economic and fiscal landscape of India during this transformative decade, emphasizing key initiatives, achievements, and the pivotal role of prudent fiscal management in supporting economic progress.
Economic Growth and Development:
India's economic trajectory during the past decade has been remarkable, consistently surpassing global averages. In 2022/23, India's GDP total was US$ 3.7 trillion and per capita was $2,612, marking a 11.67 % rise from the previous year's $2,238. In 2021, there was a 16.98% increase from $1,913 in 2020, which saw a 6.68% decrease from 2019. Today India is at the 5th position globally on the nominal GDP rank (2023) and on a per capita income basis, India has ranked 139 on nominal basis giving a GDP growth of 7.2% for the period 2022-23. Nearly 70% of India's GDP is driven by domestic and private consumption and its GDP is fueled by government spending, investments and exports..
This economic activity has been achieved due to various structural reforms like the implementation of the Goods and Services Tax (GST) regime and initiatives such as Make in India have been pivotal in driving growth. The GST streamlined the indirect tax system, fostering business ease and tax compliance. Additionally, emphasis on digitalization and innovation led to the rise of startups and expanded the digital economy, with initiatives like Digital India enhancing technology access. Furthermore, the focus on renewable energy underscores India's commitment to sustainable development.
Fiscal Policy and Economic Development:
Prudent fiscal management played a crucial role in supporting India's economic advancement during this period. Strategies aimed at maintaining a balance between government revenue and expenditure ensured stability and growth. Measures included fiscal discipline, effective resource allocation, deficit reduction, inflation control, and sustainable economic promotion. The fiscal deficit currently for 2024-25 is estimated at 5.1% of GDP, aiming for 4.5% by 2026. Major fiscal policy shifts from 2014-2024 include GST introduction, changes in expenditure allocation, and off-budget borrowings.. As of March 31, 2023, the central government's debt was Rs 155.621 trillion, (US$ 1.8 trillion) 57.1% of GDP, while state governments' debt was 28% of GDP. Despite plans for increased spending, the Centre aims to reduce its fiscal deficit to 5.1% of GDP in 2024-25.
Specific initiatives like the Pradhan Mantri Jan Dhan Yojana (PMJDY) contributed to poverty alleviation and inclusive growth, while infrastructure spending bolstered connectivity and trade. The Atmanirbhar Bharat Abhiyan prioritized self-reliance amidst the COVID-19 pandemic, fostering domestic production and reducing import dependency.
International Comparisons and Global Position:
India's economic development is evident in its improved global rankings and robust foreign exchange reserves, reflecting financial stability and competitiveness. Indices such as the Ease of Doing Business and the Global Innovation Index highlight India's growing stature on the world stage.
Achieved Poverty Reduction: Nearly 60% of Indian population is rural, and the country does face high unemployment, rising income inequality coupled with a slight drop in aggregate demand. However India made significant strides in poverty reduction, with multidimensional poverty declining from 29.17% in 2013-14 to 11.28% in 2022-23, lifting millions out of poverty. Nevertheless, even now over 230 million families remain in poverty (IMF data) pointing to the need for more government intervention for their upliftment.
Additionally, initiatives like the Made in India campaign aimed to promote manufacturing and attract foreign investment, contributing to industrial growth and job creation. The government's focus on infrastructure development through schemes like the Bharatmala Project and Sagarmala Project helped enhance connectivity and logistics, further facilitating economic growth.
Role of National Government vs. State Governments:
While the national government sets economic policies, state governments play a crucial role in their implementation and grassroots development. Collaborative efforts, exemplified by initiatives like the GST Council, are vital for effective policy implementation and balanced regional development. Further strategic reform initiatives,.utilizing the government’s new sector by sector approach to planning, are required.
India's foreign exchange reserves:
This saw a substantial increase in the last ten years reaching US$642 billion as of February 9, 2024, up from US$304 billion in 2014. This increase was supported by various factors, including robust foreign direct investment (FDI) inflows, strong exports, and prudent forex management by the Reserve Bank of India (RBI).The composition of India's forex reserves, including foreign currency assets, gold, special drawing rights, and IMF reserve position, reflects a diversified and stable reserve base, providing confidence to investors and policymakers alike.
India's decade of economic growth from 2014 to 2024 has been characterized by robust growth, driven by structural reforms, innovation, and prudent fiscal management. As India progresses towards global economic prominence, further sustained efforts towards inclusive and sustainable development remain imperative. Further Fiscal consolidation coupled with efforts to contain poverty is the need of the hour.
Reference for Further Reading:
Reserve Bank of India, Economic Growth Report 2023;
Ministry of Finance, New Delhi, Budget Highlights Report 2024;
World Bank Report on the Indian Economy;
International Monetary Fund - Country Analysis: India;
US State Department - India Country Report latest version;
Additionally, academic journals and research papers provide valuable insights into India's evolving economic narrative.
