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| Despite significant global challenges, India remains one of the fastest growing major economies in the 2022/23 financial year. Illustrative photo. (Source: Business Today) |
The World Bank's India Development Update (IDU) for the first half of 2023 assessed that despite global challenges, India will remain one of the fastest growing major economies in the 2022/23 fiscal year (April 2022 to March 2023) at 7.2%. India's growth rate is the second highest among the G20 countries and nearly double the average of emerging market economies.
India's growth engine?
India’s “remarkable” resilience is underpinned by robust domestic demand, large public infrastructure investments and a robust financial sector. India’s bank credit growth is expected to accelerate to 15.8% in the first quarter of FY2023/24 from 13.3% in the first quarter of FY2022/23.
IDU predicts that global headwinds will persist and intensify due to high interest rates, geopolitical tensions and sluggish global demand. As a result, global economic growth will slow in the medium term due to a combination of these factors.
Against this backdrop, the World Bank forecasts India's GDP growth in FY2023/24 at 6.3% with moderation in the economy largely in response to challenging external conditions and waning pent-up demand.
However, service sector activity is expected to remain strong with growth of 7.4% and investment growth is forecast to remain strong at 8.9%.
The adverse global environment continues to pose challenges in the short term, said World Bank Country Director for India Auguste Tano Kouame. “Focusing on public spending to attract more private investment is a good way for India to capture future global opportunities and thereby achieve higher growth.”
World Bank Senior Economist Dhruv Sharma, lead author of the report, added that overall conditions will remain favorable for private investment. “Foreign direct investment volumes are also likely to increase in India as the rebalancing of global value chains continues,” he predicted.
One of the growth drivers of India is its digital economy. This sector has grown rapidly due to the increase in demand and supply of digital solutions. Meanwhile, the foundation of the South Asian country’s digital economy is strongly strengthened by the government’s well-planned digital infrastructure plan.
The concerted efforts of the Indian government and stakeholders have resulted in a significant increase in digital payment transactions, contributing to the growth of businesses and the economy as a whole. Over the past decade, the number of digital transactions in India has increased from 127 billion in 2013-14 to 12,735 billion in 2022-23 (as of March 23), a growth of more than 100 times.
Journey to becoming a digital leader
While the Covid-19 pandemic has had a profound impact, directly or indirectly, on the global manufacturing sector, supply chains and financial markets, India has taken advantage of this period to minimize the negative impacts on the economy and recover quickly thanks to its digital economy strategy.
According to Indian Railways Minister Ashwini Vaishnaw, digital payment transactions amount to $1.5 trillion per year (as of December 2022). Moreover, as the Indian economy becomes increasingly integrated with the global system, cross-border payments are becoming more important.
To achieve this goal, along with expanding access to affordable, convenient and secure domestic digital payment methods, the Indian government is “working to popularize” domestic payment products such as UPI and RuPay globally. Indian digital payment systems are now available in Singapore, UAE, Oman, Saudi Arabia, Malaysia, France, Belgium, Netherlands, Luxembourg and Switzerland…
India is one of the fastest growing fintech countries in the world, driven largely by the growth of the digital transactions segment. In the FinTech sector, India was the second most funded country after the US in Q1 2023 and is among the top 5 countries and regions in terms of total funding activity.
Fintech startups in India attracted $1.2 billion in investments in the first quarter of 2023. To further facilitate integration with the global digital economy, the Reserve Bank of India (RBI) announced the pilot launch of a digital rupee in December 2022.
In an effort to promote the integration of India’s digital economy at the local level, New Delhi has introduced the JAM (Jan Dhan Account – Citizen Identification Card – Mobile Phone) triad. During the Covid-19 pandemic, the JAM triad played a key role in helping the government quickly transfer financial assistance directly to people’s accounts, even in a context of limited travel and resources.
Amid growing digital transactions globally, India continues to dominate the real-time payment protocol (RTP) landscape, with a staggering 89.5 billion transactions by 2022, registering a CAGR of 76.8%, accounting for 46% of the total global real-time transactions.
The value of digital payments as a share of GDP has increased from 660% in 2014-15 to 862% in 2018-19, making the shift to digital payments in India clearly visible. RTP is forecast to add $45.9 billion to India’s GDP by 2026 as RTP volumes are expected to exceed $206 billion by then.
India has seen a rise in successful startups in the areas of e-commerce, fintech and healthcare. Creating an environment conducive to innovation, creativity and risk-taking has paved the way for many digital leaders to emerge.
Importantly, India’s journey towards digital leadership is not just about individual achievements, but also involves the development of an environment conducive to innovation and technological development. On the contrary, India’s emergence as a global digital leader presents a golden opportunity for individuals, businesses and the nation.
With the right investment and partnership strategies, India can continue this upward trajectory, cementing its position as a global digital powerhouse.
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