Virendra Pandit
New Delhi: Amid grim projections of a cascading global economic recession next year, India’s leading banker said on Monday the South Asian country, currently the world’s fifth largest economy, can become a USD 7.5 trillion economy in the next five years.
India will remain one of the fastest-growing major economies. However, being coupled with the world economies, it will face some slowdown, said Deepak Parekh, Chairman of HDFC Ltd.
“I believe India can grow from a USD 3.4 trillion to a USD 7.5 trillion economy within the next 5 years. For India, the pace of growth is exciting,” the media quoted him as saying at the World Congress for Accountants.
India will grow at a slightly slower pace of 7 percent in 2022, but an inherent resilience is now embedded in the Indian economy, Parikh added.
India’s middle class—the number of households with USD 35,000 as annual income — may rise five-fold from 5 million now to 25 million by 2031, he said citing a recent report. Its per capita income may increase from USD 2,300 to USD 5,200 during the period.
“India has a lot going for it right now… I have never been as optimistic about India as I am today,” Parikh said, enumerating government reforms like encouraging start-ups, rolling out 5G services, and Gati Shakti, a national plan for boosting infrastructure projects.
Parekh asserted India had made strides in digitalization and financial inclusion. “As a services-driven economy, we are known as the back office of the world and we are now positioning ourselves as a high-end manufacturing hub as well,” he said.
About world central banks balancing raising interest rate hikes to curb inflation without choking economic growth, he said the organizations have a tough role ahead. “It’s a case of damned if they do, damned if they don’t”.
With the United States seeing a slight dip in the latest inflation print, markets hope that the Federal Open Market Committee may opt for a smaller rate increase of, say 50, basis points in early December, rather than force down a fifth consecutive rate increase of another 75 basis points.
“India, fortunately, has not had jumbo rate hikes, but has followed a more calibrated increase in interest rates”, Parekh said.
The global business ecosystem is entangled in a web of complexity. There are many frictional forces playing out, such as de-globalization, trust deficit, rising protectionism, broken supply chains, and risks arising from dodgy crypto assets.
“The world is in the midst of a ‘global polycrisis,” Parekh said, citing multiple challenges playing out simultaneously.