A global economic downturn will have both negative and positive consequences for India but will be ‘net positive’ for the country, Chief Economic Adviser to the Government of India, Dr V Anantha Nageswaran, has said. 

Delivering a speech on ‘Have Global Headwinds delayed India’s march towards a $5 trillion economy’, Nageswaran, said India’s exports would be affected for sure but on the other hand, a global economic decline would cause fall in interest rates in the developed world; prices of crude oil and other commodities would fall; appreciation of the US dollar would halt, or ever reverse. Adjusting the positives and negatives, Nageswaran said, a slowdown in the world economy would augur well for India. 

Also read: No GDP slowdown; ‘shallower’ recovery prognosis compares apples to oranges: CEA

‘Recession proof’

In this context, he recalled an interaction with the head of a large Indian IT company recently who told him that the Indian IT exports sector is “global-recession-proof.” The IT industry captain told him, “if the global economy is booming, I get our orders from the front office of US and European companies; if the global economy is dull, the orders come from the back offices of the companies.”  

The Chief Economic Adviser said that when he later checked the numbers, he found the IT head to be correct. “The correlation between global growth and India’s software exports growth was barely 5 per cent,” he said. 

Noting that the Indian economy was well on its way to becoming a $5 trillion economy at least by 2026-27, Nageswaran noted that the share of private consumption to GDP increased to 59.9 per cent from 56.4 per cent before the pandemic. Private consumption is rising faster than the GDP, he said. 

Read more: CEA Nagseswaran expects FY23 growth rate to be revised upwards

Private sector picking up

Pointing out that the government had been doing the heavy lifting by raising capital expenditure — 10-lakh crore budged for 2023-24, on top of ₹7.5-lakh crore in 2022-23 — Nageswaran observed that the question on everybody’s mind was, ‘when would private sector investment pick-up?’  

In answer to this, he said that the private investment had already begun to happen. Going by data provided by 3,023 large companies, in the first six months of 2022-23, the private sector invested ₹3.3-lakh crore. In the corresponding periods (April – September) of the previous three years, the total capex of the companies were ₹2.61-lakh crore (H1FY22), ₹2.20-lakh crore (H1FY21) and ₹2.79-lakh crore (H1FY20), he said. “The much-awaited private sector investment is showing signs of life,” Nageswaran said. 

He also pointed out that one short-term challenge to growth would be the behavior of monsoons due to the effect of El Nino.