AA Edit | Will festivals, elections lead to India’s dream growth run?

Once in every generation – which is roughly 30 or 40 years – the world finds itself on the cusp of a major change – spreading across domains of technology, geopolitics, as well as economics. The world confronts a similar situation now, with battle lines drawn between camps led by the United States of America and China.

While the consequences of a great power rivalry is often disastrous for the world at large, especially if it was not managed well, India has emerged as one of the foremost beneficiaries of this Sino-US competition.

Sample this: China is facing technology denials from the Western world, while India is being welcomed as its most favourite partner. In the last eight months, foreign investors pumped in $16.5 billion in the Indian stock markets – the largest such investment in Asian equities. This massive investment is a vote of confidence in the Indian economy.

The fresh foreign inflows helped Indian equities increase their valuation by $775 billion in a little more than five months. To put it in perspective, $775 billion means a little over one-fifth of India’s economy. China, on the other hand, was left out by as many as 14 emerging markets funds.

In October 2020, the combined might of five emerging markets could not equal China’s weighting in MSCI Emerging Markets Index But now, just India and Taiwan together can outshoot China in terms of market appeal, though Beijing commands a four times bigger economy than the combined GDP of India and Taiwan.

India is also faring well on many other parameters. The Indian industry has recorded a 26 per cent growth in profitability during the first quarter of the financial year 2023-24. It is the highest growth rate in the last eight quarters or two years and shows that the economy is finally out of Covid-19 blues.

The service sector, one of the dominant sectors in the country, has reported a stupendous rise in exports – the fastest in nine years – and a better hiring outlook, which augurs well for the country’s educated youth. In contrast, the economy of China, whose zero Covid policy was hailed globally in the initial stages of pandemic, is faltering, raising concerns over its impact on the global economic growth.

When business confidence is robust, consumers would not hesitate to loosen their purse strings which, in turn, sets off a virtuous cycle of greater consumption, better business growth and heightened hiring activity. This cycle could further get accentuated by the upcoming festive season, when people have a tendency to splurge.

The festive season would be followed by the election season. It is being speculated that the Narendra Modi government is contemplating to defer Assembly elections of five states that were slated to happen by December by a couple of months and advancing the Lok Sabha elections and the Assembly elections of another set of four states to a common timeline.

If that happens, the election spending by candidates in the Lok Sabha elections and those contesting in nine elections would provide a great stimulus to the economic growth, providing an optimistic scenario that was not seen after the 2003 India Shining epoch. So, India, fasten your belt for the dream ride of the millennium.