Nirmala Sitharaman Highlights India's Balanced Growth and Stability Amid Global Challenges

Nirmala Sitharaman on India's economy: India has successfully balanced economic growth and stability despite global geopolitical tensions and fragmented trade relationships. Finance Minister Nirmala Sitharaman, speaking at Columbia University in New York, stated that inflation is under control, and the country is on track to meet its fiscal deficit target. Sitharaman highlighted that while many economies struggle with inflationary pressures, India has maintained stable growth.

Key Drivers of India's Economic Growth

Sitharaman pointed to several key factors that have fueled India’s economic success:

• Effective COVID-19 Management: India’s careful handling of the pandemic minimized long-term economic disruption.
• Boost in Manufacturing: The government has prioritized strengthening the country's manufacturing capabilities.
• Digital and Financial Infrastructure: A strong focus on developing digital systems and financial networks has bolstered the economy.
• Simplified Regulations: Reforms aimed at easing regulatory hurdles have made it easier for businesses to operate, encouraging investment.
• Ease of Doing Business: Government initiatives to streamline procedures have further helped India attract investors.

These efforts, combined with robust domestic demand and growing investment, have placed India on a solid growth trajectory.

Economic Performance and Inflation Control

India’s economic performance is expected to remain strong, with the Reserve Bank of India (RBI) forecasting 7.2% growth for FY25, the highest among major global economies. In FY24, India recorded an 8.2% growth rate, driven by strong investment and robust activity in the services sector.

Retail inflation, based on the Consumer Price Index (CPI), increased to 5.49% in September from 3.65% in August due to rising food prices. However, inflation remains within the RBI’s target range of 2-6%, showcasing the country’s ability to manage inflationary risks effectively.

Fiscal Deficit Target and Debt Situation

Sitharaman also discussed the government's fiscal policy, with the fiscal deficit targeted at 4.9% of GDP for FY25, down from 5.6% in FY24. This reduction is part of a larger goal to bring the fiscal deficit down to 4.5% by FY26. Although India’s external debt remains a concern, with debt levels at 18.8% of GDP as of June 2024, the government is committed to managing the situation while maintaining fiscal discipline.

Strength of the Indian Banking System

India's banking sector remains robust, playing a critical role in supporting economic growth. Sitharaman highlighted that the banking system has low levels of non-performing assets (NPAs) and strong capital adequacy ratios, ensuring the availability of credit for investment and business activities. The health of the financial sector is a key contributor to India’s sustained economic performance.

Infrastructure Growth and Global Challenges

India has made significant strides in infrastructure development. The Sagarmala project, a major national initiative, aims to improve connectivity across the country by developing coastal regions and waterways. This project is expected to enhance India's logistics sector and boost the competitiveness of Indian exports.

However, Sitharaman warned of global challenges that could impact India’s future economic stability. The world is facing multiple crises, including conflicts in West Asia and Ukraine, trade wars, oil price fluctuations, and shocks in global dollar liquidity. These factors present significant risks for both the global and Indian economy.

India’s Vision for Future Resilience and Global Role

Looking forward, Sitharaman emphasized India's strategy to build resilience against external shocks and enhance its domestic capacities. As global supply chains are reevaluated, India is positioning itself as a key player for countries seeking to diversify their sources of goods and services.

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By 2047, India aims to create a new era of prosperity not only for its citizens but also for the global community. The government’s vision includes positioning India as a leader in global innovation, contributing to global peace and prosperity, and engaging with the international community to promote sustainable growth.