In purchasing power parity (PPP) terms, the Indian economy is already the third largest economy in the world. The RBI bulletin states that as per OECD's December 2023 update, India will overtake the US in terms of PPP by 2045 and become the world's second largest economy.
According to the bulletin, the "tailwinds powering India's take-off" are as follows:
* Demography favors a rising development profile. Currently, India has the largest and youngest population in the world. The average age is around 28 years; Not until the mid-2050s, when aging begins.Thus, India will enjoy a demographic dividend window of more than three decades, driven by rising working population rates and labor force participation rates. This is in stark contrast to a world that is facing the challenge of widespread ageing.
* India's growth performance has historically been based on domestic resources, with foreign savings playing a small and complementary role. This is also reflected in the current account deficit (CAD), which remains within a sustainable range of around 2.5 per cent of GDP. Currently, CA averages around 1 percent, and is linked to various indicators of external sector resilience – for example, external debt is below 20 percent of GDP and net international investment liabilities are below 12 percent. .*The gradual path of fiscal consolidation adopted after the Covid pandemic has targeted the general government deficit to 8.6 per cent of GDP and public debt to 81.6 per cent of GDP by March 2024. Employing a dynamic stochastic general equilibrium (DSGE) model, it is estimated that reprioritizing fiscal spending by targeting productive employment generating sectors, investing in transformation and digitalisation will reduce general government debt by 2030–31. There could be a decline of up to 73.4 percent of GDP.
In contrast, the debt-to-GDP ratio is projected by the IMF to rise to 116.3 percent in 2028 for advanced economies and 75.4 percent for emerging middle-income countries.
* India's financial sector is mainly bank based. In 2015–2016, the problem of asset impairment in the wake of the global financial crisis was addressed through Asset Quality Review (AQR).A large-scale recapitalization was carried out during 2017-2022. Beneficial effects started appearing from 201
-The performing assets ratio declined to 3.9 per cent and 1 per cent respectively by March 2023, with large capital buffers and liquid coverage ratios above 100 per cent.
The Insolvency and Bankruptcy Code (IBC) has created an institutional environment to address stress in banks' balance sheets. Macroeconomic and financial stability is providing the basis for medium-term growth prospects.
* India is going through a transformational change driven by technology.JAM's trinity – Jan Dhan (basic no-frills accounts); Aadhaar (universal unique identity); and mobile phone connection
, promoting technological startups, and enabling the goal of direct benefit transfer. India's Unified Payments Interface (UPI), an open-end system that empowers multiple bank accounts in a single mobile application of any participating bank, facilitating inter-bank, peer-to-peer, person-to-merchant transactions Promoting uninterrupted.
* Inflation in India is easing after multiple and overlapping supply shocks due to the pandemic, weather-induced food price spikes, tea supply disruptions and global commodity price pressures following the Russia-Ukraine conflict increased.
According to the bulletin, the "tailwinds powering India's take-off" are as follows:
* Demography favors a rising development profile. Currently, India has the largest and youngest population in the world. The average age is around 28 years; Not until the mid-2050s, when aging begins.Thus, India will enjoy a demographic dividend window of more than three decades, driven by rising working population rates and labor force participation rates. This is in stark contrast to a world that is facing the challenge of widespread ageing.
* India's growth performance has historically been based on domestic resources, with foreign savings playing a small and complementary role. This is also reflected in the current account deficit (CAD), which remains within a sustainable range of around 2.5 per cent of GDP. Currently, CA averages around 1 percent, and is linked to various indicators of external sector resilience – for example, external debt is below 20 percent of GDP and net international investment liabilities are below 12 percent. .*The gradual path of fiscal consolidation adopted after the Covid pandemic has targeted the general government deficit to 8.6 per cent of GDP and public debt to 81.6 per cent of GDP by March 2024. Employing a dynamic stochastic general equilibrium (DSGE) model, it is estimated that reprioritizing fiscal spending by targeting productive employment generating sectors, investing in transformation and digitalisation will reduce general government debt by 2030–31. There could be a decline of up to 73.4 percent of GDP.
In contrast, the debt-to-GDP ratio is projected by the IMF to rise to 116.3 percent in 2028 for advanced economies and 75.4 percent for emerging middle-income countries.
* India's financial sector is mainly bank based. In 2015–2016, the problem of asset impairment in the wake of the global financial crisis was addressed through Asset Quality Review (AQR).A large-scale recapitalization was carried out during 2017-2022. Beneficial effects started appearing from 201
-The performing assets ratio declined to 3.9 per cent and 1 per cent respectively by March 2023, with large capital buffers and liquid coverage ratios above 100 per cent.
The Insolvency and Bankruptcy Code (IBC) has created an institutional environment to address stress in banks' balance sheets. Macroeconomic and financial stability is providing the basis for medium-term growth prospects.
* India is going through a transformational change driven by technology.JAM's trinity – Jan Dhan (basic no-frills accounts); Aadhaar (universal unique identity); and mobile phone connection
, promoting technological startups, and enabling the goal of direct benefit transfer. India's Unified Payments Interface (UPI), an open-end system that empowers multiple bank accounts in a single mobile application of any participating bank, facilitating inter-bank, peer-to-peer, person-to-merchant transactions Promoting uninterrupted.
* Inflation in India is easing after multiple and overlapping supply shocks due to the pandemic, weather-induced food price spikes, tea supply disruptions and global commodity price pressures following the Russia-Ukraine conflict increased.
