Despite a gloomy outlook for the global economy, India will comfortably grow at a nominal rate of 13-13.5 per cent driven by the spurt in domestic demand and consumption, according to the former Finance Secretary S Narayan.

He was delivering the keynote address of a panel discussion titled ‘Fears of Global Recession and Impact on India’, organised by the Madras Management Association on Friday. 

Narayan, who was also the Economic Advisor to the Prime Minister, said the global economy is struggling with a host of issues ranging from droughts in Europe to high inflation in the US due to huge disruption in flow of energy and food because of the Russia-Ukraine war. 

IT Sector

As a result of these global developments, India’s cost of import of oil and coal, accounting for about 10 per cent of the country’s import bill, have gone up while exports have dropped due to falling demand in the developed economies. The new orders in the IT services sectors have also dropped significantly due to recessionary trends globally, he said. 

However, Narayan, added that while the international IT orders have slumped, the demand for IT services remain robust domestically due to local digitisation. “There is also huge pent up demand for hotels, travel, and restaurants, which is driving the domestic consumption in many ways.” 

Highlighting the rebound in capacity utilisation levels of Indian manufacturers, Narayan said states like Tamil Nadu, Telangana, Maharashtra and Gujarat are likely to outperform the national growth by 30-40 per cent. 

Current account deficit - a cause of concern

In his address, Raghuvir Srinivasan, Editor, BusinessLine said, while the US and Europe are staring at a deep slowdown, the other major engine of the global economy, China is struggling with a number of crises due to its zero-Covid policy. 

Noting that India is nowhere close to recession,  Srinivasan said, “Even if we grow at 5-6 per cent, we will still be the fastest growing economy in the world.” 

He added that a stable macroeconomic environment, robust financial system, positive consumer sentiment driven by pent up demand are some of the factors working in favour of India. However, he said that while the country’s fiscal deficit is at a comfortable level, the current account deficit (CAD) remains a cause for concern due to a ballooning trade deficit propelled by falling exports and increasing imports, especially petroleum. 

In his address, Ravichandran P, President - India Region, Danfoss Industries, said post pandemic, the two important issues faced by the global economy are climate change and supply chain disruptions. 

He added that the Centre’s production linked incentive (PLI) scheme and ease of doing business initiatives have attracted investments towards industries.