Is the Indian Economy truly resilient? Experts Weigh in on NCAER report.

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Yash Vora

3/27/20242 min read

India's economic motor keeps on humming. According to a recent report by NCAER, there is increasing business activity (PMI) in both the manufacturing and services sectors, which is showing an upswing in economic momentum. The PMI acts as a gauge for measuring economic activity, and the higher it is, the better it is for the economy.

High-frequency indicators reveal that the Indian economy remains resilient, with the Purchasing Manager's Index (PMI) for services accelerating and manufacturing regaining momentum, economic think tank the National Council of Applied Economic Research (NCAER) said in a report released on Wednesday. The composite PMI rose to 61.2 in January from 58.5 in December 2023, according to NCAER.

The overall notion in the market has been optimistic. The RBI has boosted its growth forecast for the current fiscal year to a solid 7%. This shows confidence in India's ability to withstand internal and external challenges.

Several factors contribute to this positivity.

Better agricultural practices in terms of better response to erratic rainfall through crop diversification, increased irrigation networks, and weather forecasting have improved agricultural productivity.

Reduced dependency on volatile oil prices: this reduction in dependency has primarily come because of a shift towards renewable energy sources, therefore shielding us from price and demand shocks.

A stable political climate just communicates a stable environment, a place in which investors can invest for the long term and earn returns.

We all have a role to play. Additionally, strict regulatory measures have ensured a healthy banking sector, fostering overall economic stability.

Challenges still hover on the horizon. Possible disruptions in capital flow remain a worry. However, proactive steps have proven effective in mitigating such risks.

But the immunity from these shocks will strengthen even more in the coming years as the economy becomes bigger and more prosperous. As the population ages, the effects of climate change become more apparent, technology replaces manual labor, and the world becomes increasingly indebted, India must prioritize sustainable growth and reduce its vulnerability to potential shocks.

The future appears bright. Growth estimates range from 6.5% to 7.5%, with a central projection of 7%. This outlook considers both past trends and the economy's increased resilience. While issues like an aging population, climate uncertainties, and global economic fluctuations pose potential hurdles, India's dedication to sustainable growth and risk management places it well for ongoing economic expansion.

In essence, the Indian economy displays notable resilience. By capitalizing on its strengths and addressing emerging vulnerabilities, India is well-positioned to navigate uncertainties and cement its status as a global economic powerhouse.


Thank you.

Regards,

Samir Khan,

Kautilya, IBS Mumbai.

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