The Indian Economy: Performance, Drivers and Risks

Subir Gokarn Executive Director and Chief Economist CRISIL

Current Performance

• Growth rate 8% + over 4-year period
• Spread across manufacturing and services • Domestic consumption, investment and exports contributing • Productivity growth

• Inflation moderate despite oil price scenario • Current a/c deficit: welcome development in face of high capital inflows • Fiscal deficit a concern, but trend is unmistakably towards control • The “Reforms Dividend”

Key Long Term Drivers Domestic • Age Demographics
• Proportion of young/working age/English comprehending people

• Income Dynamics
• Massive increase in households with discretionary spending power

Global • Diversified export basket – goods & services

• Knowledge-driven vs. mass produced exports

Major Risk Factors • Energy Intensity
• Rising oil consumption, increasing share of imports

• Employment Growth
• 55% of workforce still in agriculture (19% of GDP) • Virtuous demographic-income dynamics dependent on rapid employment growth

• Infrastructure Constraints
• Power, transport, urban amenities……………..


Concluding Comments

• India and China are uniquely positioned amongst emerging markets • The domestic market and resource base offers a reliable buffer against global turbulence • But, economic policy needs to facilitate exploitation of this balance • The opportunity is real and the risks can be addressed by effective policy


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