©K. V.

Subramanian

Disseminating the India Story

Prof. K V Subramanian
Professor (Indian School of Business)
& Ex Chief Economic Adviser, GOI
1
India offers foreign investors highest opportunity in
FY23 as GDP growth in USD projected to be highest
GDP Growth in $ estimated by IMF - FY23
11.0%
10.0%
Source: World Economic Outlook, Apr-2022
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
Canada
Sri Lanka

France
Indonesia

Australia
Brazil

Germany

Greece

Mexico
Japan

Portugal
India

Singapore

South Africa
China

Italy
Spain

United States
United Kingdom

©K. V. Subramanian 2
India offers foreign investors highest opportunity till
FY27 as GDP growth in USD projected to be highest
GDP Growth in $ estimated by IMF - till FY27 (CAGR)
10.0%
Source: World Economic Outlook, Apr-2022
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%

Canada
Sri Lanka

France
Indonesia

Germany
Australia
Brazil

Greece
Japan

Mexico
Portugal
India
China

Singapore

Italy

South Africa
Spain

United States
United Kingdom

©K. V. Subramanian 3
Indian economy this decade: Key Narratives

❑India will be the fastest growing economy in the world this

decade with 7-8% growth (in real terms) per annum.
❑Four questions key to understand this prognosis
➢Impact of Covid on India’s economic fundamentals?
➢What is the economic vision that India is pursuing? Which sectors/
areas is India emphasizing?
➢Was the growth decline before the pandemic structural?
➢What are the risks and challenges?
❑To separate facts from narratives, this presentation draws
on rigorous research published in GoI’s Economic Surveys:
➢2018-19: Strategic blueprint for $5 trillion economy
➢2019-20: Ethical wealth creation, which has been India’s DNA, key
to India’s future economic progress
➢2020-21: Post-Covid Economic Path
©K. V. Subramanian 4
 India’s macro-economic
performance during Covid

©K. V. Subramanian 5
 Macroeconomic fundamentals more resilient in once-
in-a-century COVID-19 crisis than in GFC (2008)
2009-10 2020-21
Macroeconomic Indicators GFC Covid
CPI inflation (%) 11.5 5.6
Fiscal Deficit as % of peer economies* 331 138
Current Account Balance as % of GDP -4.8 0.9
∆Revenue Expenditure (Central Govt.) 27% 5.9%
∆Capital Expenditure (Central Govt.) -4.8% 13.1%
∆Gross Fixed Capital Formation (% of GDP) -4.5% 2.4%
INR Depreciation 56% 0.06%
External Debt as % of GDP 20.7 21.1
Forex Reserves (USD billion) 252 579
∆Govt Bond Yields 10-year 4.0% 0.9%
FDI ($ billion) 8.3 80.1
FPI ($ billion) -9.9 36.2
* Emerging & developing Asia as defined in World Economic Outlook
6
As every country expands fiscally in a crisis, India’s Fiscal deficit must be compared to peers
RBI Bulletin May 2022 shows India’s external debt
performance much better during Great Lockdown
(GLD) in Covid than in Global Financial Crisis (GFC)

©K. V. Subramanian 7
India’s better macroeconomic fundamentals in
COVID-19 due to clarity of policy and courage of
conviction to be different from the rest

❑Covid-19 was a huge shock to supply

➢Supply chain disruptions
➢When engines of the economy are shut via lockdowns, they do not rev
back to full speed immediately => supply shortage

❑Advanced economies primarily undertook Demand-side

measures and are facing 4x inflation
➢Emerging economies, where supply-side frictions are far more salient
than in advanced economies, are facing 60-70% inflation in some cases

❑If India had followed the same policy as in GFC or as other

economies did in Covid, India would have had 18-20% inflation

❑India is not facing this eventuality because of India’s policy 8

©K. V. Subramanian
 To understand impact of Covid-19 on GDP
and prices, consider case of laissez faire, i.e.
no policy intervention
Prices

Aggregate
Supply (Pre
Post-Covid w/o any
Pre-Covid Covid)

Aggregate
Demand (Pre
Covid)
Post-Covid no Q1
intervention
Pre-Covid
Q0 Output
Absent any intervention, GDP ↓ much greater (Q 1 << Q0).
But inflation not much (P 1 ≈ P0) as both demand & supply ↓ 9
©K. V. Subramanian
Only demand-side intervention => inflation ↑
sharply, as is happening in other countries (400%
↑ in US vs. 4% in India vis-à-vis average) & in
India during GFC (2-digit inflation for 1.5 yrs)
Aggregate
Prices

Supply (Post
Covid)

P3
P2 Aggregate
Demand
(Post Demand
Agg Demand Stimulus)
(Post Covid
w/o intervn)
Q2 Q3
Output

Only demand stimulus => GDP ↓ is lower (Post-covid is Q3 not Q2).

But inflation ↑ (P3 >> P2) as demand ↑ but supply does not. 10
©K. V. Subramanian
 India’s COVID-19 policy response included both demand
& supply-side measures to boost output & control inflation
Prices

Agg Supply
(Post Covid w/o
intervn) Agg Supply
(Due to Supply
measures)
P3
P 2, Agg Demand
P4 (Due to
Demand
Agg Demand measures)
(Post Covid w/o
intervn)
Post-Covid no Q3 Q4 (DD & SS
intervention
Q2
(DD side measures)
Output
measures)

Demand+supply measures => GDP ↓ much lower (Post-covid is Q4 not Q3

or Q2). And inflation ↑ lower (P4 < P3 >> P2). 11
©K. V. Subramanian
India’s external debt as a % of GDP is among the
lowest
Gross External Debt/ GDP - Q42021
450.0%
400.0% Source: Quarterly External Debt Statistics (QEDS), World Bank
& World Economic Outlook
350.0%
300.0%
250.0%
200.0%
150.0%
100.0%
50.0%
0.0%

Sri Lanka
Canada

Indonesia
Australia

Brazil
France
Singapore

Greece

Germany

Mexico
South Africa
Japan

United States
Portugal

China
India
Spain

Italy
United Kingdom

©K. V. Subramanian 12
India’s short-term external debt as a % of GDP is
the lowest
Short-term External debt/ GDP - Q42021
300.0%
Source: Quarterly External Debt Statistics (QEDS), World Bank
250.0% & World Economic Outlook

200.0%

150.0%

100.0%

50.0%

0.0%
Canada

Sri Lanka
France

Brazil
Greece

Germany

Mexico
Portugal

Japan

Indonesia
Australia
United Kingdom

Spain
Singapore

South Africa

India
Italy

United States

China
©K. V. Subramanian 13
India’s short-term external debt as a % of GDP
being lowest among other countries is consistent
with proportion of short-term debt being v low

Source: Status paper on Public Debt, Ministry of Finance (April 2022)

©K. V. Subramanian 14
Indian General Government’s external debt as a %
of GDP is among the lowest
General Govt External Debt/ GDP - Q42021
150.0%

Source: Quarterly External Debt Statistics (QEDS), World Bank

120.0% & World Economic Outlook

90.0%

60.0%

30.0%

0.0%

Canada
Sri Lanka

Brazil
Greece

Germany
France

Mexico
United States
Portugal

Indonesia
Japan

Australia
United Kingdom

Singapore
Spain

South Africa

India
Italy

China
©K. V. Subramanian 15
India’s short-term external debt denominated in
foreign currency as a % of GDP is low
Short-term foreign currency External debt/ GDP - Q42021
12.0%
Source: Quarterly External Debt Statistics (QEDS), World Bank
& World Economic Outlook. Data on short-term foreign
10.0% currency external debt not available for several countries

8.0%

6.0%

4.0%

2.0%

0.0%
Germany Sri Lanka South Mexico India United China
Africa States 16
©K. V. Subramanian
Double Digit Inflation AND Current Account Deficit
> 1.8% of GDP makes India’s macro vulnerable
Macro Vulnerability chart from 1990-91 to 2019-20

3.0
'03
2.0
1.0
Current Account Balance

'01 '20
0.0 '93
2.0 4.0 6.0 8.0 10.0 12.0 14.0
-1.0 '05
'16 '14 '95
-2.0 '97 '99
'08 '91
'18
-3.0
Bubble Size denotes Fiscal Deficit (FD) '10
-4.0 In several non-crisis years, FD has been
'12
-5.0 > FD in crisis years. So, FD seems to Crisis years
matter less than inflation & CAD
-6.0
Inflation

Source: IMF, RBI ©K. V. Subramanian

17
Macro-vulnerability indicator = FD*CAD tracks
crises in India very well. Based on this indicator,
likelihood of crisis very low for India now

Crisis Years

Source: IMF, RBI ©K. V. Subramanian 18

Looking forward

©K. V. Subramanian 19
India offers foreign investors highest opportunity in
FY23 as GDP growth in USD projected to be highest
GDP Growth in $ estimated FY23
11.0%
10.0% Source: World Economic Outlook, Apr-2022

9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
Canada
Sri Lanka

France
Indonesia

Australia
Brazil

Germany

Greece

Mexico
Japan

Portugal
India

Singapore

South Africa
China

Italy
Spain

United States
United Kingdom

©K. V. Subramanian 20
India offers foreign investors highest opportunity till
FY27 as GDP growth in USD projected to be highest
GDP Growth in $ estimated till FY27 (CAGR)
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%

Canada
Sri Lanka

France
Indonesia

Germany
Australia
Brazil

Greece
Japan

Mexico
Portugal
India
China

Singapore

Italy

South Africa
Spain

United States
United Kingdom

©K. V. Subramanian 21
 Source: Economic Surveys of
2018-19, 2019-20, 2020-21

• Exclusive focus on growth to

generate resource for welfare
• Efficient welfare to not only reduce
• Wealth as boon 1.Growth inequality but also to enhance
not bane + Efficient aggregate demand
• Enabling & Welfare • Separation enables comparative
empowering of advantage & enhances efficiency
private sector
(deliberate India’s • Virtuous cycle
emphasis on New originating from
privatization & Economic private investment
asset Vision • Public capex to
monetization) “crowd in” private
investment
2.Ethical • Supply-side
3.Virtuous
Wealth reforms to
Creation Cycle accelerate private
©K. V. Subramanian investment
 Looking forward:
1. Macro-economic Hysteresis
from Covid unlikely

©K. V. Subramanian 23
Corporate Income and Profit was above Pre-
Pandemic Level in Sep-2021 itself

4.0 20
Gross Profit Total Income (RHS)
3.5 18
Rs. Lakh Crore

Rs. Lakh Crore

3.0 16

2.5 14

2.0 12

1.5 10

1.0 8

Sep/21
Sep/19

Sep/20
Dec/19

Dec/20
Jun/20

Jun/21
Jun/19

Mar/20

Mar/21
Source: Extracted from CMIE
24

©K. V. Subramanian
 Formal Sector in India has escaped macro-
economic hysteresis
Scale back of
operations
during pandemic
leading to cost
saving
Effective Low interest rate
Corporate tax regime helping
rate slashed from companies de-
35% to 26%* leverage
No erosion of
productive
* Tax cut contributed to 19% capacity =>
of top-line of 4000 listed Formal sector
companies (Report by SBI) jobs came back
strongly

©K. V. Subramanian 25
Informal sector is more impacted… but hysteresis less
likely because of high labour-intensity
❑Formal sector relies far more on capital (factories etc.) =>
Decrease capital to take care of debt obligations => Negative
shocks to earnings impact productive capacity
❑So, hysteresis was far more likely in the formal sector
❑Informal sector relies much more on labour than capital… even
the small proportion of capital is not from formal sources
❑Labour supply in the informal sector is more elastic => As
economy recovers, labour supply returns and earnings come back
❑Unlike formal sector, hysteresis from loss of productive capacity
is lower in informal sector
❑Informality inhibits growth in good times but cushions in bad
times
©K. V. Subramanian 26
 Looking forward:
2. Financial Sector Healthier
(Recall financial sector
contributed to slowdown
before Covid)

©K. V. Subramanian 27
Financial sector reforms strengthening Banking
Sector
❑Profitability: Public sector banks have returned
back to profitability and their asset quality has
improved.
❑Bad bank to become operational from this month
(Jun-2022). Will free up management bandwidth for
new credit.
❑Privatization of public sector banks a major move

©K. V. Subramanian 28
Looking forward:
3. Growth in
Manufacturing

©K. V. Subramanian 29
 Emphasis on Manufacturing for job creation
& aggregate demand
❑Jobs in the formal sector => increases aggregate consumption
❑Manufacturing crucial for jobs in formal sector
❑PLI scheme for 13 sectors (winner picking + incentive for growth)
❑Changes in MSME definitions to enable economies of scale & avoid
problem of dwarfism that hinders job creation
❑Labour law reforms to enable job creation in manufacturing
❑Infrastructure investment in Railways & Roads => ↓ logistics costs
❑Infrastructure investment in power => cost of production ↓ in mfg
❑Fin sector reforms to enable capital (DFI, ARC, privatisation of PSBs,
74% insurance FDI)
❑Move people from agriculture to manufacturing

©K. V. Subramanian 30
India's manufacturing GVA growth showing
encouraging signs

14% Growth in manufacturing GVA (% 25%

Growth in merchandise exports (%
CAGR) CAGR)India China
India China
9%
5%

4%

-15%
-1%
2005-10 2010-15 2015-19
20%
30%
Growth in manufactured goods exports Sectoral Patterns (% CAGR,
(% CAGR) 10% India China
India China FY15-19)
20%
0%
10%
0% -10%

Chemicals
Pharma

Textile
Auto prod
Iron & steel

Machinery

Others
Clothing
Transport eq
Source: UNSTATS, WTO, Axis Capital Research

©K. V. Subramanian 31
Improvement in Manufacturing stemming
from addressing systemic problems:
1. Strengthening of physical infrastructure

140 National highway length (000 Peak energy deficit

120
kms) (18)
100 (16)
80 (14)
60 (12)
40 (10)
20 (8)
(6)
2021-22 (till…
0
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14
2015-16
2017-18
2019-20
(4)
(2)
0
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
2016-17
2018-19
2020-21
Source: MoRTH, NHAI

©K. V. Subramanian 32
Improvement in Manufacturing stemming from
addressing systemic problems: 2. Significant
improvement in logistics efficiency

Average distance covered by trucks/day

India major ports turnaround time
National highways no. of lanes (RHS) 9 8.1
600 3.5 7.7 (days)
8
500 3 7
2.5 6 5.3
400 5 4.6 4.6 4.3
4.2 4 4.2
2 3.8 3.9 3.53.5
Kms

300 4
2.9 2.7 2.6
500 1.5 3 2.1
200 2
350 1
300 1

H1F…
100 0.5 0

FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY91
FY96
FY01
FY08
FY09
FY10
0 0
2011 2016 2021

©K. V. Subramanian 33
Improvement in Manufacturing stemming
from addressing systemic problems:
3. Competitive tax rates

India: Tax rate for manufacturing cos competitive vs. other

markets
30%
25% 24%
25%
20% 20%
20% 17% 17% 16%
15%
10%
5%
0%
Indonesia Malaysia Vietnam Thailand India Singapore China

©K. V. Subramanian 34
Pre-pandemic Economy:
Why did India’s growth
decline before Covid?

©K. V. Subramanian 35
Why do you need to understand the reason for
India’s growth decline before Covid?

❑If investors think that the growth decline was “structural”, i.e.
due to economic fundamentals being weak, they will doubt the
prognosis for the future

❑Only if investors believe that the reason for the growth decline
before Covid was not structural, will they believe that India has
moved on from those problems.

©K. V. Subramanian 36
Why did Growth decline before Covid?

Overhang
First Investment
Overhang from Crony
got impacted.
from problems lending till
Lower
originating in 2013 led to
investment
the financial sharp
impacted
sector is much deceleration in
growth, which in
longer than growth of
turn impacted
when credit: 9% p.a.
consumption.
problems during 2015-
Virtuous cycle
originate in 21 vs. 21.9%
slowed down
real sector p.a. from
sharply.
2005-14.

©K. V. Subramanian 37
Why did Growth decline before Covid?
❑Reference: Pages 20-27, Vol-II, Eco Survey 2019-20
❑Key point #1: When problems originate in the financial sector,
the overhang is much longer than when problems originate in
the real sector
➢Point made by academic research (Mian and Sufi, Journal of Economic
Perspectives, 2018) and
➢Policy research (International Monetary Fund, 2017, “Household Debt
And Financial Stability”, Ch. 2 in Global Financial Stability Report)
➢As an example, compare impact of Global Financial Crisis (GFC) vs. Covid
crisis. Growth bounced back immediately after Covid but the overhang
lasted several years after GFC.
❑Key point #2: Huge crony lending till 2013 => credit growth
declined from 2014 (credit growth of 9% p.a. during 2015-21 vs.
21.9% p.a. from 2005-14) => private investment declined sharply
slowing down “virtuous cycle”
❑Evidence in following slides
©K. V. Subramanian
38
 Investment in year t has maximum impact on
GDP growth four years later (see blue line)
Source: Economic Survey 2019-20

©K. V. Subramanian
39
 Boom & bust in Corporate Credit: 2013 is focal
point

Share of Corporate Loans in Non-Food Credit

Source: Economic Survey 2019-20

56%

54%

52%

50%

48%

46%

44%

42%

40%
Sep-07

Sep-09

Sep-11

Sep-12

Sep-14

Sep-16

Sep-18
Sep-08

Sep-10

Sep-13

Sep-15

Sep-17

Sep-19
©K. V. Subramanian
40
 Private Investment affected by sharp
decline in Credit
Credit growth: 2015-21: 9% p.a.
2005-14: 21.9% p.a.
Source: Economic Survey 2019-20

Firm Corporate Credit (↑ or ↓ Investment (↑ or ↓ in Relationship

Year in debt/assets): (1) Fixed Assets): (2) between (1) & (2)
2011 2006-10 2011-15 Not Significant
2012 2007-11 2012-16 Not Significant
2013 2008-12 2013-17 Significant & -ve
2014 2009-13 2014-18 Not Significant
2015 2010-14 2015-19 Not Significant
Fact shown in Table : ↑ in Corporate Credit from 2008-12 correlates
–vely with corporate investment from 2013-17. No correlation for
change in corporate credit in any of the other 5-year periods.
Inference: The boom-bust in corporate credit – with 2013 as the
focal point – led to the sharp decline in private investment.
©K. V. Subramanian 41
 Lagged effect of declining investment on
GDP growth
Source: Economic Survey 2019-20

Investment

Consumption Economic
Growth

Recall that investment has sharpest effect on growth 4 years later.

So, decline in investment from 2013 had impact on growth from 2017.
Cascading effects on consumption then through the “virtuous cycle.”
©K. V. Subramanian 42
Pre-pandemic Economy:
India’s employment
situation before Covid?

©K. V. Subramanian 43
Why am I providing the employment numbers?
❑Employment is an area where the uninformed/ misinformed
narratives have been endemic.

❑Data – from Periodic Labour Force Survey conducted by NSSO –

clearly separates the facts from the narrative

❑Employment data clearly reveal that quality of jobs has

improved
➢↑ in Salaried/ regular wage workers by 40 mn in 2019-20 vs 2011-12,
especially among females
➢↑ in formal employment by 20.6 mn

❑Side-point: NSSO Survey data is trustworthy, CMIE is not. See:

➢https://www.epw.in/journal/2021/52/commentary/how-reliable-labour-market-data-india.html
➢https://economictimes.indiatimes.com/jobs/a-tale-of-two-methodologies-which-dataset-captures-
the-real-picture-of-the-labour-market/articleshow/81234857.cms
➢https://economictimes.indiatimes.com/opinion/et-commentary/view-its-time-for-cmie-to-rethink-
how-they-determine-labour-market-data/articleshow/83554205.cms
©K. V. Subramanian 44
Regular wage/ salaried employees ↑ 46.9% (= 41 mn) in
2019-20 vis-à-vis 2011-12, 82% ↑ among females

Regular Wage/Salaried Employee (millions)

2011-12 2019-20 2019-20 vs 2019-20 vs
2011-12 2011-12 (%)
Total 88.3 129.7 41.4 46.9%
Urban 59.1 84.3 25.2 42.6%
Rural 29.3 45.4 16.1 54.9%
Male 71.0 98.0 27.0 38.0%
Female 17.4 31.7 14.3 82.1%
Source: Periodic Labour Force Survey

©K. V. Subramanian 45
Self-employed ↑ by 36.5 mn in 2019-20 vis-à-vis
2011-12 = growth of 14.9%

Self-employed (millions)
2011-12 2019-20 2019-20 vs 2019-20 vs
2011-12 2011-12 (%)
Total 245.4 281.9 36.5 14.9%
Urban 57.3 65.2 7.9 13.8%
Rural 188.1 216.6 28.5 15.2%
Male 173.3 200.2 26.9 15.5%
Female 72.0 81.7 9.7 13.4%
Source: Periodic Labour Force Survey

©K. V. Subramanian 46
Casual labour ↓ by 15.5 mn in 2019-20 vis-à-vis 2011-12
with ↓ by 18.6 mn in rural areas contributing most

Casual labourer (millions)

2011-12 2019-20 2019-20 vs 2019-20 vs
2011-12 2011-12 (%)
Total 139.2 123.7 -15.5 -11.2%
Urban 20.2 23.2 3.0 14.7%
Rural 119.1 100.5 -18.6 -15.6%
Male 99.5 89.5 -10.0 -10.0%
Female 39.7 34.1 -5.6 -14.1%
Source: Periodic Labour Force Survey

©K. V. Subramanian 47
Formal Employment ↑ by 20.6 mn in 2019-20 vis-
à-vis 2011-12 = growth of 53.8%

Organized & Unorganized (in millions)

2019-20 vs 2019-20 vs
2011-12 2019-20 2011-12 2011-12 (%)
Formal 38.30 58.90 20.60 53.8%
Informal 434.60 476.45 41.85 9.6%
Total 472.90 535.34 62.44 13.2%

©K. V. Subramanian 48
Formal Employment in organized sector ↑ by 13.8
mn in 2019-20 vis-à-vis 2011-12 = growth of 37.2%

Organized sector (in millions)

2019-20 vs 2019-20 vs
2011-12 2019-20 2011-12 2011-12 (%)
Formal 37.10 50.90 13.80 37.2%
Informal 44.70 44.57 -0.13 -0.3%
Total 81.80 95.47 13.67 16.7%

©K. V. Subramanian 49
Formal employment in unorganized sector ↑ by 6.4
mn in 2019-20 vis-à-vis 2011-12 = growth of 400%

Unorganized sector (in millions)

2019-20 vs 2019-20 vs
2011-12 2019-20 2011-12 2011-12 (%)
Formal 1.60 8.00 6.40 400.1%
Informal 389.50 431.87 42.37 10.9%
Total 391.10 439.87 48.77 12.5%

©K. V. Subramanian 50
 Labour Force Participation Rate (LFPR), Worker
Participation Rate (WPR) have ↑ and
Unemployment Rate (UR) ↓ over last 4 years
Years LFPR (%) WPR (%) UR (%)
2017-18 49.8 46.8 6.0
2018-19 50.2 47.3 5.8
2019-20 53.5 50.9 4.8
2020-21 54.9 52.6 4.2
Above data is from Annual PLFS data by NSSO.
Quarterly PLFS report by NSSO, which only tracks urban areas, showed
sharp ↑ in unemployment rate due to Covid lockdown (20.8% in Apr –
Jun, 2020 quarter).
NSSO’s Survey methodology is thus quite robust and results reliable.
Note NSSO data is not administrative data
©K. V. Subramanian 51
Potential Challenges & Risk
factors

©K. V. Subramanian 52
 Is quality of macro-data a challenge? No… See
Economic Survey 2019-20
❑No! See https://www.indiabudget.gov.in/budget2020-
21/economicsurvey/doc/vol1chapter/echap10_Vol1.pdf
❑Using careful statistical and econometric analysis, this chapter finds no
evidence of mis-estimation of India’s GDP growth. The models that
incorrectly over-estimate GDP growth by 2.8% for India post-2011 also
mis-estimate GDP growth over the same time period for 51/95 other
countries in the sample. The magnitude of mis-estimation in the
incorrectly specified model is anywhere between +4% to -4.6%,
including UK by +1.6%, Germany by +1.0%, Singapore by -2.3%, South
Africa by -1.2% and Belgium by -1.3%. However, when the models are
estimated correctly by accounting for all unobserved differences among
countries as well as the differential trends in GDP growth across
countries, GDP growth for most of these 52 countries (including India)
is neither over- or underestimated. In sum, concerns of over-estimation
of India’s GDP are unfounded. ©K. V. Subramanian
53
Real Challenges and Risk Factors
❑Global economy, especially supply-side problems
stemming from the Ukraine war

❑Inflation becoming systematically embedded through

inflation expectations, which then may lead to
monetary policy being unsupportive of growth

❑Implementation of several initiatives and reforms

announced post Covid

©K. V. Subramanian 54
Thank You

©K. V. Subramanian 55