India, with a total population of 1.42 billion and a growth rate of 1.1 percent, is experiencing a demographic dividend with a rapidly increasing young workforce combined with an accelerated growth in the size of its middle class. As an established technology powerhouse, India is on its way to becoming a digitally advanced country. The Reserve Bank of India (RBI) in its August Monetary Policy Statement raised its projected CPI inflation rate for the current fiscal year (2023-24) to 5.4%, compared with its 5.1% year-over-year projection made in the June Monetary Policy Statement. This nevertheless represents a significant moderation from the 6.5% rise in CPI inflation in fiscal year 2022-23.
After real GDP contracted in FY20/21 due to the COVID-19 pandemic, growth bounced back strongly in FY21/22, supported by accommodative monetary and fiscal policies and wide vaccine coverage. Consequently, in 2022, India emerged as one of the fastest growing economies in the world, despite significant challenges in the global environment – including renewed disruptions of supply lines following the rise in geopolitical tensions, the synchronized tightening of global monetary policies, and inflationary pressures.
India is expected to be the fastest growing nation in 2023 among the G-20 grouping of the world’s largest nations that attended the G-20 Leaders’ Summit hosted by India in New Delhi on 9th -10th September. After rapid economic growth of 7.2% in the 2022-23 fiscal year, economic momentum has remained strong in the April-June quarter of 2023, with GDP growth of 7.8% year-on-year.
India has also become an increasingly attractive location for multinationals across a wide range of industries, with foreign direct investment inflows (FDI) having reached a new record high of USD 85 billion in the 2021-22 fiscal year.
India’s GDP growth rate rose to a pace of 7.8% y/y in the April-June quarter of 2023, compared with growth of 6.1% y/y in the January-March quarter of 2023, according to data released by India’s National Statistical Office. The strong growth rate was despite high base year effects after GDP growth of 13.1% y/y in the April-June quarter of 2022.
In FY22/23, India’s real GDP expanded at an estimated 6.9 percent. Growth was underpinned by robust domestic demand, strong investment activity bolstered by the government’s push for investment in infrastructure, and buoyant private consumption, particularly among higher income earners. The composition of domestic demand also changed, with government consumption being lower due to fiscal consolidation.
Since Q3 FY22/23, however, there have been signs of moderation, although the overall growth momentum remains robust. The persisting headwinds – rising borrowing costs, tightening financial conditions and ongoing inflationary pressures – are expected to weigh on India’s growth in FY23/24. Real GDP growth is likely to moderate to 6.3 percent in FY23/24 from the estimated 6.9 percent in FY22/23. (Source: https://www.worldbank.org/en/country/india/overview)
In recent years, India has witnessed intensified weather patterns, with the monsoon season becoming more erratic and less predictable over time. The current period of heavy rainfall is occurring closely on the heels of an intense heatwave that also affected much of northern India. While various factors contribute to flooding, experts point to climate change as a significant driver of increased occurrences of heavy rainfall. Heavy rainfall during the 2023 monsoon season resulted in severe flooding and landslides across northern India, primarily affecting residents of Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Jammu and Kashmir, Haryana, Rajasthan, and Delhi.
