Over the past ten years, the government's capital expenditures, or capex, have been the main driver of the remarkable rise. This is in spite of Covid, which tarnished the advantages of a corporate tax cut, and the forces of unfavorable global winds, which caused wobbles. However, the potential for additional tax reductions of roughly 15% for new manufacturing firms in the interim budget for 2024 is expected to help those who are moving entirely or partially from China, among other groups.
Union Minister Ashwini Vaishnav said PLI projects that are drawing high-investment manufacturing, such as computer chips and semiconductor microchips, would launch in December 2024. The first semiconductor microchips will be manufactured in Gujarat, India, at an investment of $825 million by US major Micron.
Gaining International Attention
The defense industry's aatmanirbhar programme is thriving, which is contributing to the sharp increase in the value of the related private and public sector equities. Even if positive relations and links with Russia persist, the US, France, and Israel have emerged as significant collaborators. For example, Israel installed an anti-drone system to guard the magnificent temple at Ayodhya.
Numerous nations have shown admiration and interest in doing business with India as a result of the Indo-Russian Brahmos missiles' effectiveness in all of their land, sea, submarine, and air variants. This has solidified India's defense and offensive capabilities. Overtaking Hong Kong, the Indian stock market is now ranked fourth in the world.
Unearthing Untouched Realm
An election year budget is required to include social welfare for the underprivileged and marginalized as well as incentives for the unorganized and MSME sectors. These items would undoubtedly be prominently featured.
The possibility of an additional 20 percent increase in capital expenditure in 2024, from 35 percent in the current fiscal year, will be crucial in facilitating Modi's smooth transition from his successful second term to his nearly certain third term, which is expected to spur growth. It is currently being claimed that there would be a 7% GDP growth, as opposed to 6.3–6.5% previously, due to global headwinds that will affect not only 2024–2025 but also the seven years leading up to 2030.
A Robust Roadmap Ahead
According to a recent assessment by the Indian government, it is commonly anticipated that the country's GDP will reach $7 trillion by 2030, with an additional $5 trillion forecast by 2027. Interest rate reductions will be postponed for some time as the RBI is concerned about inflation, which has slowed but is still 5.9%, much above the target of 4.5%.
Based on a recent Goldman Sachs research, there is a good chance that both manufacturing and exports will expand by 5 percentage points by 2030. This would entail a doubling of export and production volume and quantum compared to 2021 figures. Naturally, each should receive a larger portion of the GDP. As these industries advance thanks to the China plus one tale, this will present substantial employment prospects for skilled workers.
A Burgeoning Electronics Industry
The manufacturing of smartphones and automobiles has already been a huge success in India and has significant growth potential. Samsung plans to not only export and match Apple's sales in India, but it will soon begin producing laptops in Noida. Exports have surpassed Rs 200,000 crore, while the electronics industry has increased to Rs 830,000 crore.
Many believe that there will be significant progress in providing affordable housing, including improved tax incentives on house loan interest, simpler financing, and the release of government-owned property for this purpose. This makes sense during an election year, but there is room to do much more than just assist those who are relatively impoverished in purchasing pucca homes with nearby amenities.
Steering Real Estate Growth
The entire residential and commercial real estate market, currently valued at $120 billion by Statista, is projected to reach $1 trillion by 2030, representing 13% of the increased GDP. For many years, this industry has been bringing in migrants from rural India and employing millions of people, both men and women, in both skilled and unskilled jobs. Even though we are lagging behind other industries in adopting digital tools, it would still be helpful to know how many people are employed in construction during a boom. When given the right conditions, as the real estate industry suggests, including industry standing, funding, tax breaks, and other benefits, this sector of the economy may undoubtedly play a significant role in employment, modernization, and growth promotion for the country as a whole.
Infrastructure Prominence
Naturally, infrastructure has evolved into a term that encompasses super roads and highways, hotels, motels and other supportive infrastructure; railways, which include multiple freight corridors; the manufacture of rolling stock, track, wheel and digital signalling equipment; tunnels, bridges; high-speed trains, bullet trains, rapid transport linkages; the manufacture of entire train sets; electrification; the expansion of the system into previously unserved areas and territories; a significant upgrade of airports and train stations, as well as a major extension of the metro system across numerous cities, ports, including transshipment ports, and ports.
All of this has been gradually expanding job opportunities, and it will keep doing so in step with GDP growth. These days, the NHAI is always looking to hire. Additionally, the real estate and infrastructure sectors are excellent consumers of heavy machinery, earth movers, bulldozers, graders, and similar items.
New Tax Regime
The states and the federal government are receiving more investible revenues for development and sustainability thanks to the more effective taxing structure under direct taxes and GST. The majority of the leaks have been sealed off.
Duvvuri Subbarao, a former governor of the RBI, listed "jobs and inequality" as the main shortcomings of the Modi administration. Up to 40% of young people are unemployed, according to his writing. This kind of alarmism would not exist if only all those who have entered the service industry, the expanding tourism industry, part-time work, and the vast uncharted territory of the informal sector were statistically recorded.
Aligned with the charges levelled by Left-Liberal commentators, Subbarao references "jobless growth," which is really an oxymoron given that growth requires support. For the sake of argument, however, Subbarao continues by condemning the "quality of growth" as opposed to the "quantum of growth," even if this slander remains unquestioned. I am unable to recall a single suggestion made by Subbarao during his ride that clarified this discrepancy.
Even while this general viewpoint is debatable, as the slogans of a socialist mentality imply, it is likely hinting at the creation of millions of government employment, despite the fact that this has historically proven to be inefficient. Even though there is a waste of skill involved, this is as ineffective as having five people change a light bulb. It may be seen as a popular solution. That being said, there is no denying another of his criticisms.
Female labour force participation (GLPR), according to Subbarao, "presents a distressing picture." He's correct, but is the government solely to blame? Better utilizing the female labour force, as in China, has the potential to boost GDP by an additional 1 to 1.5%.
Given that women are now noticeable in practically every sector of endeavor, both high and low, despite their relatively small numbers, is this also a social and patriarchal issue that will take time to resolve? In a sense, Arvind Panagariya, a professor at Columbia University and the current chairperson of the Finance Commission for India, is at the other extreme of Subbarao's school of economic thought.
Since his days as the Vice Chairman of Niti Aayog and even earlier, he has continuously argued for the reduction or removal of tariff barriers. He contends that the government-imposed tariff wall has hindered the growth of the Indian car sector, and that if it were abolished or brought down to the level of the ASEAN nations, both the industry and the consumer would benefit greatly.
He claims that without free trade, no nation can expand at a rate of 8 to 10 percent and disagrees with the rise in protectionism that has occurred since 2014. However, is free trade practiced by the US, EU, UK, or China? They most definitely don't. Laissez faire, or free commerce, is in some senses an imperialist concept that solely benefits the colonial power.
Although Panagariya's argument is well-intentioned, it may be a bit theoretical at times. It is appropriate for an academic to say that. Would dumping and other unfair trade practices overwhelm Indian business and industry, as well as its farm sector, or would this kind of policy simultaneously help job creation?
Financial Stability
Despite extremely hefty import tariffs, Maserati sold 103 of its supercars in India in 2023 for prices above Rs 4 crore apiece. To sell even more, it also requests improved infrastructure and reduced charges. As with Western nations, money seems to be abundant at the top in India.
Targeted welfare with no leaks is essential in a nation with such a big population, when a sizable portion of the population is unquestionably impoverished. This covers the construction of infrastructure like rural roads, the supply of gas, electricity and water connections, the provision of free food during jobless periods, healthcare, education, digital connectivity and a certain amount of pure give-aways and subsidies. The Modi administration has taken care to prioritize development while also meeting, at least in part, the demands of the impoverished. Undoubtedly, the interim budget for 2024 will maintain this vital balance between not being ruthless capitalists nor total socialists.
