As the health and economic shocks of the pandemic and the spike in commodity prices in 2022 wear off, the Indian economy is thus well placed to grow at its potential in the coming decade, similar to the growth experience of the economy after 2003.
The sound and healthy financial system developed over the last few years will ensure efficient credit provisioning, contributing to higher growth in the coming years through higher investments and consumption.
In India’s digital revolution and formalisation, banks have far more information about their customer’s credit risks than before, thus being able to make credit and pricing decisions better than before. The digitalisation reforms and the resulting efficiency gains in terms of greater formalisation, higher financial inclusion, and more economic opportunities will be the second most important driver of India’s economic growth in the medium term.
In its recent Article IV report for India, IMF highlighted that India’s successful implementation of the wide-ranging reforms and more than expected dividends from digitalisation could increase India’s medium-term growth potential.
The notable economist Indira Rajaraman termed GST ‘a revenue success’ asthe positive GST revenue collection trends have strengthened further despite the pandemic. It was visible that the average monthly gross GST collection has increased from ₹0.90 lakh crore in FY18 to ₹1.49 lakh crore in FY23.
The Indian economy could have grown faster in the absence of the financial and corporate sector balance sheet stress. It was clear from the report that it suggests a restored credit cycle will rejuvenate the Indian private sector capex cycle.
That alone is adequate to enable India to grow at least 6 per cent per annum in real terms. The Economic Survey Report 2023 suggests to pursued various economic reforms in the Coming Years and thereby, India’s potential GDP growth can rise to 7-8 per cent per annum in the medium term
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