The government has steered the Indian economy through one of its most difficult phases in a prudent manner
The government has steered the Indian economy through one of its most difficult phases in a prudent manner | Photo Credit: K_ K_ Mustafah

It is human nature to feel a surge of hope and optimism, as we see the old year fading away and the New Year dawning over the horizon. The New Year symbolises new beginnings, bringing with it a fresh burst of energy and the promise of better, prosperous times.

As 2023 trails off to become a memory and 2024 welcomes us into its fold, it is quite apparent that the mood in India is different from the one prevailing in some other parts of the world such as Europe or China. Corporate profits are robust, consumer spending is resilient, macro fundamentals are strong, and the stock market is booming.

The government has steered the Indian economy through one of its most difficult phases in a prudent manner. Macro stability has been safe guarded, not frittered away.

As I look forward to 2024, it is difficult not to feel a surge optimism and confidence about the economy and its prospects. India has grown strongly so far in FY24 — 7.8 per cent and 7.6 per cent — in the first two quarters on top of a 7.2 per cent growth in FY23.

Capex surge

There is every reason to believe that the momentum will continue. India could also be on the verge of a substantial pick-up in corporate capex cycle, thanks to growing demand in energy, metals, and infrastructure.

For instance, power PLFs are already at decade highs, and the government has called for 80 GW of new thermal power capacity to meet demand by 2030. Companies are adding capacity in renewables and cement, and a big pick-up in metals capacity is expected to meet demand for EVs and clean energy.

I am expecting global growth to be an overhang, thanks to unsustainable debt levels in the US and anaemic recovery in both China and Europe. This could affect short term growth, but not something to lose sleep over. India’s vast domestic market is often cited as one of its greatest strengths, and opportunities in the vast, untapped hinterland could well become the next big growth engine for the country.

Rural experience

Our banking experience and that of the industry shows how exciting this opportunity is. In the September quarter, our Small Business Banking (SBB) witnessed impressive year-on-year growth of 42 per cent. The rural loan portfolio grew 24 per cent year-on-year during this period.

Though there is weakness in certain sections, rural India has held up very well compared to urban India in multiple areas. There’s a notable downward trend in the overall Unemployment Rate (UR) from 5.3 per cent in 2017-18 to 2.4 per cent in 2022-23, and in urban areas down from 7.7 per cent to 5.4 per cent.

In rural areas, the Labour Force Participation Rate (LFPR) saw an uptick from 50.7 per cent in 2017-18 to 60.8 per cent in 2022-23, and in urban areas, it rose from 47.6 per cent to 50.4 per cent. What’s equally important is that the increase in female participation in labour work force has happened in rural areas.

Another encouraging example is that of women borrowers and MSME registrations. Government data show that nearly half of small business registrations in 2020-23 came from women. Of the 44.46 crore loans sanctioned under the Pradhan Mantri Mudra Yojana (PMMY) as of November 24, 2023, 69 per cent have been granted to women. Additionally, under Stand-up India (SUPI), out of 2.09 lakh loans sanctioned, 84 per cent have been approved for women.

Interestingly, increased expenditure in India’s rural areas is revitalizing the consumer goods sector. For instance, NielsenIQ report indicates that the consumer goods sector witnessed a robust 9 per cent growth in value in September FY24, supported by elevated rural spending.

Two-wheeler sales considered a barometer of the health of India’s rural economy is also reflecting its vitality and economic well-being.

Optimism unabashed

Of course, much work needs to be done in infrastructure, housing and education in these areas. We should be careful not to repeat the mistakes that have hobbled development in some of our bigger cities.

But we also shouldn’t be cowed down by challenges and the scale of the problem. India has shown very often that it has the ability to pick itself up and beat the odds whenever required. This never-say-never-die spirit and undying optimism is what makes me confident and hopeful about the future.

The writer is MD & CEO, Axis Bank