FY 23 – The Deep Ditch of War, Interest Rates & Inflation, where West Failed when India Sailed!
NewsBharati 08-Jun-2023 12:25:07 PM
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How did India manage to stay, the fastest major economy clocking real 7.2% GDP Growth in FY 23?
Why didn't the wrath of war, inflationary pressures, and higher interest rates impact India?
Chapter 2, Verse 38, Lord Shree Krishna explains Arjuna who is confused about why he should pursue War and kill his kin on the battlefield.
Meaning: One should fight for the sake of fighting to protect the ultimate Dharma, without considering happiness or distress, loss or gain, victory or defeat – and by so doing one shall never incur sin.
Bharat has always pursued this as the overarching principle in every sphere of life, whether economy, society, or maintaining her territorial integrity. This is what has been taught by the forefathers and continues to be the guiding principle for every Bharatiya.
“A recession in 2023 is now inevitable. Layoffs in tech and finance will spread to other sectors”; Fortune magazine, March 27, 2023
One can imagine the depravity the world is witnessing when the engine of the world, 5th largest economy and perhaps the most populous economy growing at 7% +, and yet, there is a chance of the World economy shipping itself into recession. One can imagine the rot that rests inside some of the so-called developed nations.
India’s handsome growth is not lopsided but broad-based. Higher farm output and expansion in agriculture, overall growth in manufacturing, and compendious growth across sectors including, construction, mining, and financial services, across the board one witnessed buoyancy.
Excellent management of the Crude bill with Russia’s collaboration, easing of raw material prices, and RBI’s excellent monetary management with the base interest rates acted as enablers.
✔ India's manufacturing sector output climbed by 4.5% (Q4FY23), compared to a 1.1% contraction in the previous corresponding quarter (Q4FY22).
✔ The farm output or the agriculture sector swelled by 5.5% (Q4FY23) compared to 3.7% growth in the same period last fiscal.
✔ The electricity, gas, water supply, and other utility services segment expanded by 6.9% during the fourth quarter reflecting momentum in the underlying business & economic activity.
✔ GVA (Gross Value Added) growth in the services sector including trade, hotel, transport, communication, and services related to broadcasting registered a whopping 9.1% in the fourth quarter (Q4FY23) against a growth of 5% a year ago (Q4FY22).
✔ Financial, real estate and professional services grew by 7.1% in the March 2023 quarter compared to 5.7% a year ago.
✔ The construction sector grew at 10.4% in Q4FY23 as against 4.9% in Q4FY22.
✔ The biggest achievement of the country is the growth in Exports. In April 2022, (immediately after the Russian-Ukraine War broke down, global uncertainty increased), the undeterred Government of India set a target of 800 billion USD in exports for FY 23, ~ 19.5% higher than FY 22 (aggressive target as FY 22 was backed by strong consumption post covid).
Despite a hostile external environment, slowing global demand due to war, and high inflationary pressures due to war-led sanctions leading to rising energy bills for the West, India managed to clock a robust exports of 770 billion in FY 23 thereby posting a jump of ~15%.
There are always several reasons that contribute to success but a few or some define and lead the path. In India’s growth momentum, the biggest catalyst has been Infrastructure Creation & its seamless execution backed by strategic Planning
A few years ago, the Government of India announced 100 lakh crores of National Infrastructure Pipeline aimed at creating jobs, creating infrastructure for trade and commerce, and creating a multiplier effect believing that it will propel consumption, capex, and investments. (Many mocked at the time)
The results are visible today in the GDP numbers. Let’s enunciate this with one of the examples: The Port Infrastructure of the Country
How investments in ports are changing the economy of India?
Exceptional, Unparalleled, and Unequivocal maritime expertise had been one of the biggest strengths of the historic Bharat, which was diminished, destroyed, and diminuted by the Invaders, inner feud, and by Britishers.
Bharat, over millennia back, had been trading with ancient civilizations like Mesopotamia and others through the Ocean Route. Indian Ocean trade route during the Maurayan empire (324 – 185 BCE) was used to export the finest silk, muslin, spices, tools, and artifacts to the Roman and Persian empires.
Cholas also used Sea trade routes to expand their influence in the Southern region of Asia.
India realized her age-old strength and started working on Maritime Infrastructure a few years ago.
At present India has 12 major ports run by the Central government and 200 Non-Major Ports run by the State governments. Most of them were primitive and had a problem of congestion, Poor Port Infrastructure, Poor administration, and poor technology adoption.
Port Projects also formed part of the National Infrastructure Pipeline.
To change the share in the Sea Trade, the government first made the constitutional amendments repealing and replacing the age-old Merchant Shipping Act 1958 with Merchant Shipping Bill 2020, and Major Port Authorities Bill 2020 both aimed at easing the decision-making and administration of the Ports in the Country.
Then the work started on 68 Port Projects with a total spend of 6.6 billion dollars modernizing the existing Ports and creating 6 new Mega ports.
To create a larger yet sustainable impact in 2015, Sagarmala Project was brought in. This project was initiated by Shri Vajpayee Ji in 2003 and was put on hold for a decade by the subsequent government.
Sagarmala Project was conceptualized not only for the development of the Ports but the wholesome all-around development of the surrounding areas as well led by the ports including CEZs (Coastal Economic Zones), rails, roads, and waterways connecting to the ports. The idea is to develop the 7516 KM coastline of India.
These hubs will then be connected to the Industrial Corridor so that connectivity can be enhanced and export time can be shrunk significantly. Coastal economic zones will then further promote tourism as well as manufacturing activity leading to further exports.
Till now 194 Projects have been completed under Sagarmala comprising an outlay of 99000 Crores. In addition to this 218 projects with an outlay of 2.12 lakh crores will get completed by 2025.
These initiatives around Ports have already brought efficiency in the system reducing the turnaround time in ports by ~ 40% from 44.70 hours in 2013-14 and that stood in 2022-23 at 26.58 hours.
Every minute on the port costs money to the exporter or the importer, thus efficiency in this means savings and cost-effectiveness for the manufacturing businesses that are producing and exporting contributing to the growth of the economy.
Furthermore, the Cargo handling capacity of 12 mega Ports in India in 2013 -14 stood at 800 Million tons per annum whilst the same jumped more than double to 1598 million tons per annum as of March 2022.
Ports also assist in National Security enabling the Navy of the Country. This is one of the examples of how integrated Infrastructure Creation is changing the economic landscape for India. Continuing its commitment towards constructive growth, FY 24 Union budget committed a highest-ever infra expenditure amounting to ~4.5% of the GDP.
The next leg in the cycle is demand creation and one can witness that with the growth in air travel where domestic air passenger traffic in India jumped from 10.54 million in April 2022 to 12.88 million in April 2023.
One of the disjoint parts of the economic Progress of India had been Agriculture Sector. Agriculture has been a sore point for India’s growth for a long time reporting modest growth driven only by monsoons.
However, thanks to the government policies of financial inclusion (Jan Dhan, DBT), removal of bureaucratic institutions, creation of self-help groups and farmers’ cooperative society, establishing a link between startup entrepreneurs, agricultural research, and common farmers, modernizing farm equipment and giving support financially to obtain such equipment and technology has helped India to record highest Food exports in FY 23.
India's agricultural exports rose 6.04% between April 2022 and January 2023 in comparison to the same period the previous year. The agricultural exports amounted to $40.90 billion between April 2021 and January 2022, the figure is $43.37 billion for the same months in 2022-23. During the financial year 2021-22, India’s agricultural exports touched the highest-ever level of $50.21 billion. The data for FY 23 complete year is yet to come and will give a positive Philip to the agricultural sector.
Looking at the promising prospects, the total value of investments into aggrotech startups also has more than doubled from $412 million in 2020 to $846 million in 2022. This shows that technology, youth, and government policy can keep the oasis green even when global headwinds are indicating a prolonged dry desert.
Thus Siddhartha Rastogi says, the economy is like a body, where a few sectors, strata, or segments can’t be ignored for the overall well-being of the person and thus one needs to pursue the path of conjoint, inclusive, and combined growth even if it means a bit of moderation, as that moderation will lead to a longer sustained growth into the future.
Why didn't the wrath of war, inflationary pressures, and higher interest rates impact India?
Will India continue to be the Growth Engine for the World?
Chapter 2, Verse 38, Lord Shree Krishna explains Arjuna who is confused about why he should pursue War and kill his kin on the battlefield.
“सुखदुःखे समे कृत्वा लाभालाभौ जयाजयौ ।
ततो युद्धाय युज्यस्व नैवं पापमवाप्स्यसि II”
Meaning: One should fight for the sake of fighting to protect the ultimate Dharma, without considering happiness or distress, loss or gain, victory or defeat – and by so doing one shall never incur sin.
Recent Headlines
“A recession in 2023 is now inevitable. Layoffs in tech and finance will spread to other sectors”; Fortune magazine, March 27, 2023
“Germany falls into recession as inflation hits economy”; BBC News, 25th May 2023
“Is the world economy slipping into recession?” EFG International, 14th Feb 2023
One can imagine the depravity the world is witnessing when the engine of the world, 5th largest economy and perhaps the most populous economy growing at 7% +, and yet, there is a chance of the World economy shipping itself into recession. One can imagine the rot that rests inside some of the so-called developed nations.
The Backdrop
The story of India’s growth in 2022 – 2023 is not inked in FY 23 alone, it is rather an outcome of actions that were undertaken during Covid, reforms undertaken through the last eight to nine years by India, and lack of it by the rest of the World.
When the Western World was opportunistically trying to make money on the human catastrophe Covid, India was trying to help everyone by supplying free vaccines and medicines.
During the peak Covid period (2020 -2021), India swiftly also fixed its supply chain issues by focusing on alternate countries, aligning her interests with them as well as substituting imports with indigenous production (Make in India, Make for India, Make for the World), making India magnificent Manufacturing Hub. The results are quite visible now.
Today & Now
In FY 23, the Indian economy grew by 7.2% and crossed a 3.3 trillion USD mark delivering 6.1% Real GDP growth in Jan to March 2023 quarter. During the same period (Jan-Mar 2023), China posted a growth of 4.5%.India’s handsome growth is not lopsided but broad-based. Higher farm output and expansion in agriculture, overall growth in manufacturing, and compendious growth across sectors including, construction, mining, and financial services, across the board one witnessed buoyancy.
Excellent management of the Crude bill with Russia’s collaboration, easing of raw material prices, and RBI’s excellent monetary management with the base interest rates acted as enablers.
Sector Wise Statistics
✔ India's manufacturing sector output climbed by 4.5% (Q4FY23), compared to a 1.1% contraction in the previous corresponding quarter (Q4FY22).
✔ The farm output or the agriculture sector swelled by 5.5% (Q4FY23) compared to 3.7% growth in the same period last fiscal.
✔ The electricity, gas, water supply, and other utility services segment expanded by 6.9% during the fourth quarter reflecting momentum in the underlying business & economic activity.
✔ GVA (Gross Value Added) growth in the services sector including trade, hotel, transport, communication, and services related to broadcasting registered a whopping 9.1% in the fourth quarter (Q4FY23) against a growth of 5% a year ago (Q4FY22).
✔ Financial, real estate and professional services grew by 7.1% in the March 2023 quarter compared to 5.7% a year ago.
✔ The construction sector grew at 10.4% in Q4FY23 as against 4.9% in Q4FY22.
✔ The biggest achievement of the country is the growth in Exports. In April 2022, (immediately after the Russian-Ukraine War broke down, global uncertainty increased), the undeterred Government of India set a target of 800 billion USD in exports for FY 23, ~ 19.5% higher than FY 22 (aggressive target as FY 22 was backed by strong consumption post covid).
Despite a hostile external environment, slowing global demand due to war, and high inflationary pressures due to war-led sanctions leading to rising energy bills for the West, India managed to clock a robust exports of 770 billion in FY 23 thereby posting a jump of ~15%.
What India did do differently?
There are always several reasons that contribute to success but a few or some define and lead the path. In India’s growth momentum, the biggest catalyst has been Infrastructure Creation & its seamless execution backed by strategic Planning
Infrastructure Spend: When the West was busy doling out freebies and free cash to its citizens, the Government of India was busy paring its debt by keeping the cess on crude products and creating infrastructure to take India to the pole position that it stands today.
A few years ago, the Government of India announced 100 lakh crores of National Infrastructure Pipeline aimed at creating jobs, creating infrastructure for trade and commerce, and creating a multiplier effect believing that it will propel consumption, capex, and investments. (Many mocked at the time)
The results are visible today in the GDP numbers. Let’s enunciate this with one of the examples: The Port Infrastructure of the Country
How investments in ports are changing the economy of India?
Exceptional, Unparalleled, and Unequivocal maritime expertise had been one of the biggest strengths of the historic Bharat, which was diminished, destroyed, and diminuted by the Invaders, inner feud, and by Britishers.
Bharat, over millennia back, had been trading with ancient civilizations like Mesopotamia and others through the Ocean Route. Indian Ocean trade route during the Maurayan empire (324 – 185 BCE) was used to export the finest silk, muslin, spices, tools, and artifacts to the Roman and Persian empires.
Cholas also used Sea trade routes to expand their influence in the Southern region of Asia.
India realized her age-old strength and started working on Maritime Infrastructure a few years ago.
At present India has 12 major ports run by the Central government and 200 Non-Major Ports run by the State governments. Most of them were primitive and had a problem of congestion, Poor Port Infrastructure, Poor administration, and poor technology adoption.
Port Projects also formed part of the National Infrastructure Pipeline.
To change the share in the Sea Trade, the government first made the constitutional amendments repealing and replacing the age-old Merchant Shipping Act 1958 with Merchant Shipping Bill 2020, and Major Port Authorities Bill 2020 both aimed at easing the decision-making and administration of the Ports in the Country.
Then the work started on 68 Port Projects with a total spend of 6.6 billion dollars modernizing the existing Ports and creating 6 new Mega ports.
To create a larger yet sustainable impact in 2015, Sagarmala Project was brought in. This project was initiated by Shri Vajpayee Ji in 2003 and was put on hold for a decade by the subsequent government.
Sagarmala Project was conceptualized not only for the development of the Ports but the wholesome all-around development of the surrounding areas as well led by the ports including CEZs (Coastal Economic Zones), rails, roads, and waterways connecting to the ports. The idea is to develop the 7516 KM coastline of India.
These hubs will then be connected to the Industrial Corridor so that connectivity can be enhanced and export time can be shrunk significantly. Coastal economic zones will then further promote tourism as well as manufacturing activity leading to further exports.
Till now 194 Projects have been completed under Sagarmala comprising an outlay of 99000 Crores. In addition to this 218 projects with an outlay of 2.12 lakh crores will get completed by 2025.
Quantifying the Impact
These initiatives around Ports have already brought efficiency in the system reducing the turnaround time in ports by ~ 40% from 44.70 hours in 2013-14 and that stood in 2022-23 at 26.58 hours.
Every minute on the port costs money to the exporter or the importer, thus efficiency in this means savings and cost-effectiveness for the manufacturing businesses that are producing and exporting contributing to the growth of the economy.
Furthermore, the Cargo handling capacity of 12 mega Ports in India in 2013 -14 stood at 800 Million tons per annum whilst the same jumped more than double to 1598 million tons per annum as of March 2022.
Ports also assist in National Security enabling the Navy of the Country. This is one of the examples of how integrated Infrastructure Creation is changing the economic landscape for India. Continuing its commitment towards constructive growth, FY 24 Union budget committed a highest-ever infra expenditure amounting to ~4.5% of the GDP.
The next leg in the cycle is demand creation and one can witness that with the growth in air travel where domestic air passenger traffic in India jumped from 10.54 million in April 2022 to 12.88 million in April 2023.
Agriculture Expansion & Farm Output
One of the disjoint parts of the economic Progress of India had been Agriculture Sector. Agriculture has been a sore point for India’s growth for a long time reporting modest growth driven only by monsoons.
However, thanks to the government policies of financial inclusion (Jan Dhan, DBT), removal of bureaucratic institutions, creation of self-help groups and farmers’ cooperative society, establishing a link between startup entrepreneurs, agricultural research, and common farmers, modernizing farm equipment and giving support financially to obtain such equipment and technology has helped India to record highest Food exports in FY 23.
India's agricultural exports rose 6.04% between April 2022 and January 2023 in comparison to the same period the previous year. The agricultural exports amounted to $40.90 billion between April 2021 and January 2022, the figure is $43.37 billion for the same months in 2022-23. During the financial year 2021-22, India’s agricultural exports touched the highest-ever level of $50.21 billion. The data for FY 23 complete year is yet to come and will give a positive Philip to the agricultural sector.
Looking at the promising prospects, the total value of investments into aggrotech startups also has more than doubled from $412 million in 2020 to $846 million in 2022. This shows that technology, youth, and government policy can keep the oasis green even when global headwinds are indicating a prolonged dry desert.
Thus Siddhartha Rastogi says, the economy is like a body, where a few sectors, strata, or segments can’t be ignored for the overall well-being of the person and thus one needs to pursue the path of conjoint, inclusive, and combined growth even if it means a bit of moderation, as that moderation will lead to a longer sustained growth into the future.
Siddhartha Rastogi
Siddhartha Rastogi is Managing Director & Chief Operating Officer of a Leading Full Service Investment Bank. Views and opinions expressed in this article are those of the authors and do not necessarily reflect the official view or position of any company or sister concerns or group company where the author is presently employed.