India’s Surprisingly Robust Economic Growth Boosts Modi Ahead of Election
India’s economy has reported unexpectedly strong growth, providing a significant boost to Prime Minister Narendra Modi just weeks before a nationwide election. The country’s statistics office revealed that the gross domestic product (GDP) of the world’s fastest-growing major economy surged by 8.4% in the final quarter of 2023 compared to the previous year. This growth rate exceeded analysts’ expectations and solidified India’s position as the strongest among major economies during that period.
The positive economic data is expected to further enhance optimism about India’s economic prospects. A separate report from real estate consultancy Knight Frank predicts a 50% increase in the number of ultra-rich Indians, those with a net worth of at least $30 million, by 2028. This growth in wealth is set to be the highest globally. The International Monetary Fund (IMF) projects a 6.5% expansion for India’s economy in 2024, while the Modi government has set a higher estimate of 7.6% for the fiscal year ending in March.
Prime Minister Modi expressed his satisfaction with the robust GDP growth, stating, “Our efforts will continue to bring fast economic growth which shall help 1.4 billion Indians lead a better life.” The sustained expansion of India’s economy is expected to propel it to become the world’s third-largest economy by 2027, according to analysts at Jefferies.
India’s economic success is not only significant domestically but also internationally. It is increasingly seen as an alternative to China for countries and companies seeking to diversify their supply chains, particularly amid strained relations between Washington and Beijing. The Indian government has actively courted multinational firms to establish factories in the country while investing billions in infrastructure development, including roads, ports, airports, and railways.
Major companies such as Apple supplier Foxconn have already expanded their operations in India, and Tesla CEO Elon Musk has expressed interest in investing in the country. In line with its goal of becoming an electronic manufacturing hub, the Modi government recently approved an investment of over $15 billion for the construction of three semiconductor plants by firms like the Tata Group. This move is expected to create thousands of advanced technology jobs and further boost India’s semiconductor capabilities.
Despite the positive sentiment surrounding India’s economic growth, economists caution against excessive optimism. Nomura warns that “underlying growth is weaker than what the headline suggests,” emphasizing that consumption is still lagging and the agriculture sector, which contributes 16% to India’s GDP, has underperformed. HSBC economists also advise maintaining a calm approach while acknowledging India’s incredible pace of growth amidst a volatile global backdrop.
Thamashi De Silva, assistant India economist at Capital Economics, suggests that the momentum behind India’s economic growth may slightly fade due to weaker global growth affecting exports and tighter restrictions on unsecured lending limiting household spending. However, she believes that any slowdown will be mild, as the government’s infrastructure initiatives are likely to support economic activity.
In conclusion, India’s unexpectedly robust economic growth has provided a significant boost to Prime Minister Modi ahead of the upcoming election. The country’s strong performance not only positions it as a major global economic player but also offers an alternative to China for countries and companies seeking to diversify their supply chains. While economists advise caution and highlight areas of weakness, the overall outlook for India’s economy remains positive, with the government’s infrastructure drive expected to sustain growth in the coming years.