It said in its annual World Economic League Table 2023 that over the next five years, the annual rate of GDP growth is expected to average 6.4 per cent, after which growth is expected to average 6.5 per cent in the subsequent nine years. This growth trajectory will see India rise from fifth place on the World Economic League Table in 2022 to third in the global rankings by 2037, the consultancy said in the report released on Monday.
Cebr said India had an estimated PPP-adjusted GDP per capita of $8,293 in 2022, classifying it as a lower middle-income country. PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates.
Though agriculture employs a bulk of majority India labour market, Cebr said most of the country’s economic activity is accounted for by the nation’s services sector, as its economy has diversified and developed over the years.
“The pandemic had a particularly devastating effect on the South Asian country – in absolute terms, India has the third highest death toll globally. This, in turn, led a significant decline in economic activity, with output contracting by 6.6 per cent in fiscal year 2020-21,” the consultancy said.
Cebr said in the report that a sharp rebound in economic activity followed, fuelled by an uptick in domestic demand, as the pandemic subsided, resulting in GDP growing by 8.7 per cent in fiscal year 2021-22, making it the fastest-growing major economy in the world.
The UK-based consultancy still expects growth in fiscal year 2022-23 to remain robust, at 6.8 per cent, in spite of decelerating global demand and tightening monetary policy to curb inflationary pressures. This, in turn would bring output 8.4 per cent above 2019 levels.
The consultancy report said output growth is expected to ease in fiscal year 2023-24, however, with Cebr forecasting growth of 5.8 per cent, as accelerating, price levels bite into domestic demand. Annual inflation in India has exceeded target in 2022, at 6.9 per cent, thereby above the Reserve Bank of India (RBI)’s tolerance band upper margin of 6 per cent, according to the report.
The report also stated that inflation in India had been lower than in most other large economies as inflation in the country remains both closer to its target range, and to the previous decade’s average of 5.8 per cent than in many other countries.
Moreover, much of India’s current inflation rate reflects higher food prices, an erratic item but one that also accounts for a larger share of the consumer basket than in any other G20 country, Cebr said in the report.
The RBI has raised interest rates to bring back inflation to its target range. According to Cebr, higher borrowing costs will weigh on public debt, especially on top of expanded infrastructure spending and targeted fiscal measures.
The report said government debt currently stands at 83.4 per cent of GDP, with a high fiscal deficit amounting to 9.9 per cent of GDP in 2022 and added that fiscal consolidation would eventually be necessary to ensure that debt levels do not destabilise the economy.
The Cebr takes its base data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.