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India’s GDP will expand by 7.4 percent this year, the country’s government predicts, approaching triple the pace of the 2.9 percent global growth the World Bank now projects.
The reason: India’s economy is driven by domestic demand consumption, not exports.
However, exports are still important, especially now that the rupee’s value has declined and made key exports, including medication, jewelry, and processed diamonds, cheaper elsewhere.
The country’s economic boom is due, in part, to the disappearance of draconian COVID-era lockdowns that slashed jobs and economic productivity. Pent-up demand has surged.
Also, the government has stepped in with sharp increases in public investment, debt relief, and credit guarantees for small and medium-sized businesses.
In addition, India was quick to buy Russian oil, which is now discounted by about $20 a barrel from world prices.
After importing no oil from Russia last February, India brought in $3.2 billion worth of Russian crude in April and May, according to Forbes, after Russia invaded Ukraine and the West shunned Russia’s exports.
India’s economy has now become the world’s fifth largest, surpassing Britain, the colonial power that once ruled it.
“We have left them behind to move ahead in the world economy,” declared prime minister Narendra Modi. “More than moving from sixth to fifth, the joy was in this.”
However, even though India’s GDP grew by 13.5 percent in this year’s second quarter, it still missed economists’ expectations of 15 percent and struggles to meet the basic needs of a population expected to soon be larger than China’s.
As much as 10 percent of the population lives on welfare.
Imports are growing at twice the rate of exports, The New York Times reported, and hospitality and transportation sectors still lag the economy’s larger recovery.
“Demand for luxury items, or those consumed by the upper middle class, is growing,” Sunil Shinha, chief economist at India Ratings and Research, told the NYT, “but items of mass consumption are not showing the growth.”
While India booms, growth in the world’s advanced economies is pegged at just 2.6 percent this year, with the U.S. eking out 2.3 percent in 2022 and 1 percent next year, the International Monetary Fund (IMF) has forecast.
“The world may be teetering on the edge of a global recession only two years after the last one,” Pierre-Olivier Gourinchas, the IMF’s chief economist, noted when the agency released its last quarterly forecast in July.
TREND FORECAST: Much of the New World Order is now being formed with China, India and Russia vs. the West. Minus a ramping up of WWIII that will destroy the world, we forecast that these three nations, while becoming more self-sufficient, will rely on each other for resources, trade and military alliances.