How Indian economy will boom in the next few years? | Welfin- Best financial advisor in Kolkata

According to the Nasscom-Zinnov report ‘Indian Tech Start-up,’ India would have 100 unicorns by 2025, creating 1.1 million direct jobs. According to the McKinsey Global Institute, India has to boost its employment growth rate and create 90 million non-farm jobs between 2023 and 2030 to boost productivity and economic growth. To attain 8-8.5 percent GDP growth between 2023 and 2030, the net employment rate must expand at a rate of 1.5 percent each year. The foreign exchange reserves of India reached US$ 634.287 billion on January 28, 2022, according to data from the Department of Economic Affairs. Here are five significant macroeconomic elements that will bloom Indian economy in the next few years

Despite Covid, five things will define the Indian economy in 2022.

  1. A rise is expected in the Indian economy in the next few years

The gross domestic product (GDP) growth rate is predicted to be higher in the fiscal year 2022-23. Incomes and output will rise not only as a result of the low base impact but also as a result of improved company forecasts and expected global and domestic demand.

While the Omicron-led third wave is predicted to make the first few weeks of this year challenging, recovery is expected to resume in the months ahead.

While the Omicron variety is highly transmissible, it is thought to be less severe than the other variations. The loss of life and livelihoods is expected to be minimal as vaccination rates, herd immunity, and our ability to cope improve.

By the end of 2021, over 61% of the adult population had received both vaccine doses, and approximately 90% of the adult population had received a single dose. Teenagers have begun to be vaccinated. The third dose of vaccine for healthcare workers and people over 60 with co-morbidities is now available. High vaccination rates will allow for greater mobility and will aid in the recovery of demand.

Given the virus’s unpredictability, there could be some growth risks, particularly in contact-intensive industries, although these are likely to be limited to the first few months of the year. Eventually, the Indian economy in the few years may bloom if everything is under control.

 

  1. Inflationary pressures are very high.

Inflation has reached new highs in both advanced and emerging markets. Global challenges such as rising commodity costs, global logistics, supply-side constraints, and industrial raw material prices will all have an impact on India’s growth trajectory.

In November 2021, the WPI-based inflation rate, which takes into account these global influences, hit a new high of 14.32 percent. Retail inflation, as measured by the Consumer Price Index (CPI), reached 4.91 percent in November. However, the large disparity between WPI and CPI shows wholesale price pressures, which will most certainly be passed on to consumers in the following months.

In response to rising input costs, several companies, notably in the consumer goods sector, have raised their pricing. In the following months, cost-push factors are expected to weigh on core inflation.

Additional restrictions in the early months of 2022 could cause supply-side disruptions and increase inflationary pressures. Inflation may moderate over the year as supply interruptions fade and demand returns to normal.

CPI inflation is expected to be 5.7% in the January-March quarter, according to the Reserve Bank of India. Inflation is expected to be 5% in the first half of the following fiscal year.

  1. Fluctuating interest rates

The RBI has been normalizing its monetary policy since March 2020 to mitigate the effects of the pandemic.

While the RBI has maintained constant repo and reverse repo rates in prior policy statements, additional measures such as variable rate reverse repo auctions and the sale of government assets have begun to normalize policy.

As a result of these moves, liquidity has been absorbed, and short-term rates have moved closer to 4%. In the coming months, short-term rates are projected to climb much further as the RBI continues to normalize policy in the face of rising inflation.

Long-term bond rates are at an all-time high, owing to rising US bond yields and rising domestic inflation. The budgetary crisis will have an impact on the long-term yields. If the government targets a greater borrowing program for the following fiscal year, 10-year bond yields are expected to rise much more.

  1. choppy Markets

For stock market investors, the year 2021 produced enormous rewards. The market’s surge was fueled by improved corporate profitability, greater retail investor engagement, and a series of initial public offerings (IPOs).

Markets are anticipated to be volatile due to global factors such as the US Federal Reserve’s taper announcement and interest rate hikes, as well as the risk from the Omicron variation. The market’s trajectory will be influenced by foreign investors’ exposure to Indian assets and the US dollar’s movement in the coming months. Thus, the Indian economy in the next few years will bloom

 

  1. Banking’s NPA growth

Banking’s NPA growth in the Indian economy in the next few years

Banks have remained resilient in the face of the epidemic, according to the RBI’s Financial Stability Report, which was released last week. In September 2021, the percentage of bad loans held by banks reached a six-year low of 6.9%. Bank capital has also improved significantly.

Bank balance sheets may be stressed as policy assistance is withdrawn. Micro, small, and medium-sized businesses, as well as personal loans, are beginning to show symptoms of stress.

Under the baseline scenario, non-performing assets (NPAs) will exceed 8% by September, according to the research. The number of bad loans at state-owned banks is anticipated to rise even faster. They might also need more money to deal with the new stress that certain borrowers are experiencing. Banks may become more cautious lenders as a result of this.

In other words, as both GDP and inflation rise, central banks around the world, including the RBI, may raise interest rates, causing financial market volatility.

Asia’s third-largest Indian economy is expected to grow at 8.9 percent in 2021-22, according to recent government data. The Reserve Bank of India (RBI) has forecasted 7.8% GDP growth for 2022-23.

I hope this gives an idea about the scenario of the Indian economy in the next few years.

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