India set for strong economic rebound seen in 2000s: RBI Dy Guv Patra

While private consumption remains pivotal, the economic resurgence will be fuelled by investments and exports, said Michael Debabrata Patra

India’s growth trajectory is poised for a significant upswing following the pandemic, with early indicators hinting at a return to the robust growth rates exceeding 7 per cent seen in the 2000s. The Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra made this observation on Monday during Nomura’s 40th Central Bankers Seminar in Tokyo, Japan. The speech was subsequently released on the RBI website on Thursday.

Patra said that while private consumption continues to be a key driver, it is investments and exports that are expected to fuel this resurgence. Although global headwinds have subdued export growth, public expenditure on infrastructure is emerging as a pivotal force in driving the growth momentum forward. Recent surveys indicate a surge in private investment sentiment.

“In the period 2021-24, the export lever has been muted by global headwinds, but public expenditure on infrastructure is taking over as the locomotive of the step-up in the growth trend. Recent surveys indicate that private investment is getting crowded in,” he said.

India’s economic performance has surpassed expectations, leading to upward revisions in growth forecasts by institutions like the International Monetary Fund. Projected to contribute significantly to global growth, India is poised to emerge as one of the largest economies worldwide by market exchange rates and purchasing power parity (PPP). Projections indicate India will exceed Germany and Japan in market exchange rates in the next decade, becoming the second-largest economy by PPP terms. This strength is mirrored in the projected growth of the Indian rupee.

The deputy governor said that India is emerging from the pandemic with resilience, ready to pursue its development goals amidst challenges. To fully utilise its demographic dividend, efforts are needed to enhance workforce contribution to GDP growth, including upskilling through initiatives like ‘Skill India’. Encouraging entrepreneurship, digital transformation, and promoting women’s participation in the workforce are crucial. Moreover, investing in high-quality infrastructure is also essential, requiring increased spending and efficient regulations, he said.

Formalising jobs, particularly in manufacturing, is key to India’s future economic expansion, he said. Efforts are underway to boost the share of manufacturing in GDP through adaptation to the fourth industrial revolution and expanding exports. As India strengthens its manufacturing base and internationalises its currency, it faces the challenge of greening its economy for sustainable development, aligning with commitments made at COP26.

Meeting these challenges will require significant investment, technological advancement, and policy support, positioning India for continued growth and global leadership, RBI’s deputy governor said.