While speaking at an event to celebrate Azadi Ka Amrit Mohotsav hosted by RBI on Saturday, Patra said that “India’s economy is a world leader in the production of various agricultural products.”

Patra explained that in 2021, India has become the world’s largest exporter of rice, with more than the combined exports of the world’s No. 2 and 3. India has one of the widest manufacturing bases among emerging economies, ranging from the largest producer and exporter of tractors and two-wheelers to the top 10 exporters of smartphones, cars and spacecraft. In several services, including maritime personnel and information technology (IT), India is a world leader. In the case of IT, India has become the back office of the world.

A widely used indicator of a country’s economic progress is the growth of gross domestic product, which is the value of all final goods and services produced in an economy for, say, a quarter or a year, he said. .

“GDP growth averaged around 7% until the pandemic arrived,” Patra added.

In the 2020-21 fiscal year, GDP fell to 6.6% due to the pandemic, Patra pointed out, while it fell back to 8.7% in the 2021-22 fiscal year, raising GDP to 1.5% above its pre-pandemic level.

RBI forecast GDP growth of 7.2% for the current financial year, Patra added, “putting India among the fastest growing economies in the world.”

Highlighting what are the drivers of India’s growth, Patra said, it turns out that the Indian economy is powered by “we”, the people – private final consumption expenditure (PFCE) comprising household expenditure in goods, services, rents, insurances, pensions contributions and all other expenses which correspond to the daily means of subsistence.

Patra said: “There were phases of export-led and investment-led growth, which could not be sustained, but they marked turning points in the path of growth. In particular, the Investment, which is the production of goods which, in turn, produce other goods is seen as the game changer for India, as it is for most developing countries which lack capital. (total investment/GDP) is widely regarded as the most important driver of growth in India.

According to the Deputy Governor, a striking feature in India is that growth is locally financed – investment is financed mainly by domestic savings, with foreign savings only playing a complementary role.

“Another notable feature is that the savings rate started to slow down since 2007-08 after the global financial crisis,” Patra added, “this eventually brought down the investment rate which has been slowing since 2012-13. Reversing this trend is key to achieving higher growth.”

Talking about the current account deficit, Patra said that for India, imports usually exceed exports and hence foreign exchange earnings are not enough to cover import payments. The gap must be filled by borrowing abroad which, however, must be covered by payment of principal and interest.

“If debt service exceeds our income, we either have to cut imports and stifle our growth prospects, or default on debt payments and face international isolation,” Patra advised.

Additionally, Patra believes that the country’s manufacturing sector needs to adapt to the fourth industrial revolution (automation, data exchange, cyber-physical systems, Internet of Things, cloud computing, cognitive computing, smart factory and advanced robotics).

Furthermore, he advises India to develop a skilled workforce by stepping up investment in human capital. In addition, efforts should be made to boost the international competitiveness that allows manufacturing to have a voice in global markets.

“India must raise the share of manufacturing to at least 25% of GDP to become a global industrial hub,” Patra said.

Furthermore, Patra believes it is within reach to increase India’s share of world exports to at least 5%.

Additionally, Patra highlighted four challenges. He said the first is the loss of production and livelihoods due to the pandemic.

Regarding the first challenge, Patra said, “The agglutination of supply disruptions, the health crisis, unprecedented mass migration and a hostile global environment weighed heavily on the Indian economy. The combination of the compression of the demand and supply disruption that has taken hold in the pandemic and in its wake has caused severe debilitating effects.”

“If a trend line is fitted to the level of India’s GDP and extended to 2021-22 at the compound annual growth rate (CAGR) of 6.6% that prevailed over the period 2013-20, a comparison of this trend GDP with real GDP in 2020-21 and 2021-22 will give a rough measure of lost output due to the pandemic,” he said.

So, Patra said, “recovering this lost production may take several years – I will consider this the first most important challenge.”

The second challenge is India’s infrastructure deficit. According to him, the main requirements for infrastructure development are transparent and faster regulatory processes; clear, transparent and effective land acquisition and climate change policies; and viable infrastructure financing that takes a long gestation in infrastructure projects. Building world-class infrastructure is the next big challenge for India’s takeoff.

While the third challenge is to develop a high quality workforce. He said: “As India transforms into a manufacturing hub and a powerful exporter, the workforce needs to grow and become more skilled over time. Emphasis should be on increasing the contribution of quality to GDP growth rather than quantity.He also added that we need to create workplaces that do not stigmatize working women and instead encourage them to earn a living with dignity and satisfaction.

India ranks 178th out of 187 countries in female labor force participation rate in 2020, according to the World Bank.

And the fourth challenge is a “greener and cleaner India”. He said: “There is a silver lining when it comes to renewables, however. In order to reach 500 GW by 2030, renewables would need to grow at a compound annual growth rate of 14.2% per year. At the current average growth rate of 18.7% (2014-15 to 2020-21), we could reach the 500 GW target by 2027.”

Regarding the fourth challenge, Patra further explains that India will need adequate energy storage facilities to bridge the gap between the timing of renewable energy generation and actual energy consumption.

He said: “We need to minimize transmission and distribution losses. We need to address regional concentration of renewables because it is location-specific — primarily southern states — and not evenly distributed. The pricing structure should reflect real costs while avoiding cross-trading. subsidies that harm industries and business establishments. And we must find a solution to the problem of the debts inherited from the DISCOMs.

Currently, India is the world’s third largest economy by purchasing power parity (PPP), with a 7% share of global GDP after China (18%) and the United States. United (16%).

“India’s GDP at market exchange rate is expected to reach $5 trillion by 2027. By that year, India’s GDP at purchasing power parity will exceed 16 $10 trillion (from $10 trillion in 2021) OECD calculations for 2021 indicate that India’s economy will overtake the United States by 2048. This would make India the largest economy in the world. world after China,” Patra said.

In his closing remarks, Patra said, “If India takes advantage of its opportunities and overcomes the challenges that I have addressed in the time available for this briefing, it is widely believed that India will gain time. mentioned above, it is possible to imagine that India enters the next decade with a growth rate of 11%.

If the 11% growth rate is achieved, Patra said, “India will become the second largest economy in the world not by 2048 as previously stated, but by 2031. Even if it does not maintain this pace and slows to 4-5% in 2040-50, it will become the largest economy in the world by 2060.”

“As I said in my opening remarks, you may think I’m a dreamer, but let me remind you that while history doesn’t repeat itself, it often rhymes,” Patra concluded.

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