India is being hailed as a bright spot on the world stage by many at the World Economic Forum in Davos. India’s growth is being attributed to its infrastructure spending, foreign investment, the digital transition, and inflation heading lower. However, some analysts argue that the country is largely benefiting from weak comparisons.
The International Monetary Fund predicts that China will outpace global growth once more in 2023, with a forecast of a 4.4% rise in GDP, which is well below India’s estimate of 6.1%. The Centre for Economics and Business Research believes that India could speed past Germany and Japan to become the world’s third-largest economy over the next decade, hitting $10 trillion by 2035.
Many non-Indian companies at the WEF summit, including Nokia and Ericsson, highlighted India as one of their fastest-growing markets. Ericsson’s CEO, Börje Ekholm, said that 5G infrastructure was rapidly developing in India and that it will soon have the best digital infrastructure outside of China. India also has ambitions of becoming a global chipmaking hub and is already a world leader in digital payments. Additionally, India is looking to develop in areas such as solar, wind, and green hydrogen production.
The chief executive of Tata Consultancy Services, Rajesh Gopinathan, said that he is “very optimistic and very positive on India.” He attributes this to the combination of a stable political environment and significant government investments in infrastructure, which are providing a positive environment for growth. India is also well-poised for the planned energy transition, as it is “building out into a new element without legacy infrastructure to get out of.”
India has benefited from buying Russian oil at a heavily discounted rate, while Europe has faced sharply higher prices, market volatility, and fears of shortages. Inflation has also been less severe in India than in many other countries, with Consumer Price Index coming in at 5.7% in December. The chairman of the State Bank of India, Dinesh Kumar Khara, said that it was “absolutely” true that India was in a sweet spot compared to its rivals, noting the country’s vaccine rollout, its measures to tame consumer price growth, and its focus on infrastructure creation.
However, it’s not all rosy for India. A 2021 Deloitte report said that India still needs to go a lot further to build a sustainable and resilient economy, particularly in areas such as human capital development, private investment, and government efficiency. Additionally, the country’s GDP per capita remains low, and there are still significant challenges in areas such as healthcare, education, and income inequality.