With strong macroeconomic fundamentals, demographic dividend, highly-skilled English-speaking workforce, ease of doing business, cheap labour, enormous resources and an expanding market of 1.3 billion people, India is a fundamentally strong country. However, over the past four-five years, the economy has gone off the fast-growth track, hastened by the Covid-19 pandemic.

Former RBI Governor Raghuram Rajan said that India’s V-shaped economic recovery is no particular cause for cheer, as “the important question is, have we come out of the malaise and will we return to our trend level of growth?” If a bad enough downturn is created, the recovery will always be V-shaped.

Anand Mahindra wrote on his Twitter handle: “The Indian economy is often referred to as an elephant. More recently, it was termed a tiger as its growth sped up. Well, even if it’s an elephant, this shows that you should never count us out; we always find a way no matter how awkward — to get over hurdles in our way!"

Such perspectives do not underline a positive outlook. It reveals that India’s path to progress is bedevilled by both global and domestic hurdles.

The challenges

Despite the government’s narrative of back-on-track economic growth, private final consumption expenditure, an indicator of consumer demand from households, is still far from the pre-pandemic levels. The Consumer Confidence Survey conducted by the RBI for November indicates that the outlook vis-à-vis employment, income, spending and inflation continues to be pessimistic.

Global commodity prices are on the upswing, , and with global economic growth looking up, supply bottlenecks are likely.

Global interest rates are expected to have an impact on the rates in India. Historically, FIIs have been seen withdrawing partially from a market after periods of sustained outperformance. The US dollar is expected to strengthen against a basket of currencies, including the rupee, and this could also be a dampener on FII inflows in the near term.

The Centre for Monitoring the Indian Economy reports the unemployment rate for college graduates is 19.3 per cent, almost three times higher than the national average.

Potential opportunities

But there are many areas that offer opportunities for the economy to grow. For instance, the Cabinet recently cleared an ambitious $10-billion incentive package for localised manufacturing of chips, the shortage of which has paralysed the consumer electronics and automobile industry.

In the medium term, the government needs to focus on its National Infrastructure Pipeline (NIP), as part of which it has announced plans to spend ₹111-lakh crore by 2024-25, and its Production Linked Incentive (PLI) schemes that support 13 sectors with a corpus of ₹2-lakh crore.

The government should take a nuanced and calibrated approach to assist sectors that are the most vulnerable, including tourism, hospitality and retail. It should offer targeted support to MSMEs that are finding it difficult to meet production commitments due to a lack of access to credit.

The government can speed up the activation of the Indian National Space Promotion and Authorisation Centre — the regulator for private players in the space sector — and man it with people from outside ISRO.

The urban poor need support — this could help kick-start demand and lead to more investments by the private sector.

The Centre should push its disinvestment agenda, which will supply much-needed capital. Some economists say the government shouldn’t worry too much about the fiscal deficit and must boost spending if needed

Initiatives such as Atmanirbhar Bharat , modernisation of agriculture, promoting labour-intensive, export-oriented industrialisation, development of high-quality social and economic infrastructure, and providing efficient and transparent governance are vital to spurring growth.

For India to capture global markets, it must focus on boosting technology and digitalisation, strengthening environmental laws, and undertaking tax and business reforms.

To catapult to economic prosperity, India not only needs to think bigger but also act better.

Mehta is a consultant , and Mittal is a policy enthusiast. Views are personal