ESSAY

ON

INDIAN ECONOMY: CHALLENGES AND OPPORTUNITIES

Indian economy has been the fastest growing economy in the world, it has witnesses
rapid growth since 2004. But due to various policy decisions by the government post 2014
and majorly post covid-19 pandemic the economy grew its slowest in a year with a 4.1 per
cent increase in gross domestic product during Q4 of 2021-22. As per the survey of National
Statistical Office (NSO) who estimates that the economy grew by 8.7 per cent during fiscal
year 2021-22, which is lower than the earlier estimate of 8.9 per cent. It had grown by 20.3
per cent, 8.5 per cent and 5.4 per cent, respectively, in the first three quarters of FY22.

In Q4 of fiscal year 2021-22, private final consumption expenditure (PFCE) and

investment growth were at down trend, even the growth drivers like manufacturing,
construction and services are weighing down. PFCE has rose by 1.8 per cent year-on-year,
while gross fixed capital was up 5.1 per cent during the quarter, also gross value addition in
the manufacturing sector contracted by 0.2 per cent during the quarter. India’s annual per
capita income at constant prices was calculated to be Rs 91,481 in FY22, which remained
below pre-pandemic levels of Rs 94,270 in FY20 but marginally above than 85,110 of FY21
i.e., 7.48%.

Economic growth of the country has showed strength despite of pressure in Q4 due to
the war between Ukraine & Russia. Although economy grew at a slower pace based on QoQ
basis, but YoY basis showed an improvement in consumer spending and autonomous
investment. It was expected that commodities and crude oil prices may pose a risk to global
growth but normal monsoon in the country would ease inflationary pressures. However, to
control inflation in the country it is expected that RBI would continue to raise key rates, to
check liquidity in the market. This continued move of rate hiking would give negative impact
on the growth of the economy and would raise unemployment rate as well. It is noteworthy to
understand growth rate in the first quarter of fiscal year 2022-23 after the move from RBI.

According to a report by Kotak Institutional Equities, the fiscal year 2022-23 would
be clouded with uncertainties emanating from geopolitical developments and their impact on
commodity prices. The report further adds that the key challenges would be weakening
consumption demand due to the impact of cost-push inflation; delayed pick-up in private
sector investment given relatively weaker demand visibility along with increasing cost of
borrowing; limited ability of the government to spend on public infrastructure; and
weakening global growth. In the global scenario, the world nations are inter-connected to
each other through economic transactions, if one part of the worlds is struggling then it would
impact the world economy. Lack of demand around the world would slow down the
economic activities and this would lead further slowdown even in the second quarter of
FY2022-23 .