Economic growth in India will slow to 5.9% in 2023, compared with a predicted 6.9% in 2022, according to international investment bank Goldman Sachs.
“Growth will likely be a tale of two halves, with a slower first half as the reopening boost fades, and monetary tightening weighs on domestic demand.
“In the second half, growth is likely to re-accelerate as global growth recovers, drag from net exports diminishes, and investment cycle picks up.”
However, there is cause for optimism, the bank said. In its ‘Asia Views – 2023 Outlook: Inflation Peaks and Growth Troughs’ report, Goldman Sachs said: “India is entering a window of strategic opportunity for reform and rapid development. Domestically, conditions have normalized after the damaging Covid pandemic.
“Efforts to implement tax reforms (GST) and digital platforms (Aadhaar) under the current and previous governments are beginning to pay dividends.”
It said that the political setup is conducive to further economic reforms, as India’s government has a comfortable majority.
It added: “Internationally, global firms are looking to diversify sources of supply, and India presents a potentially attractive consumer market over the long term, a favourable backdrop for the government’s ‘Make in India’ initiative.
Another major rating agency has also cut its growth forecast for India. Moody’s Investors Service cut India’s economic growth forecast to 7% from its earlier estimate of 7.7%. It cited the tightening of monetary policy, higher inflation and an uneven monsoon as the main reasons.
India’s gross domestic product grew at 8.7% in 2021-2022, compared with a contraction of 6.6% during the previous financial year, according to official government data. The growth rate was less than the 8.9% estimated by the Ministry of Statistics and Programme Implementation.
The lower-than-expected figure was because of a slowdown in growth in the agriculture, mining, construction and manufacturing sectors.
India agrees trade deal with Australia
India has signed a bilateral free trade agreement with Australia, which signed a similar deal with Britain at the same time, as Canberra looks to diversify its export markets.
The deals need to be ratified by the respective Indian and British parliaments before they take effect.
Australia Trade Minister Don Farrell said India had demonstrated its commitment to the bilateral economic partnership through the quality of the deal struck. “Closer economic ties with India are a critical component of the government’s trade diversification strategy,” Farrell said.
He added that the British deal was “crucial to boosting our growth”.
Taxes on 90% of Australian goods exported to India including meat, wool, cotton, seafood, nuts and avocados, will be removed under the terms of the pact.
Australian Prime Minister Anthony Albanese discussed the deal with Indian Prime Minister Narendra Modi and British Prime Minister Rishi Sunak at the recent Group of 20 summit in Indonesia. Albanese said he would visit India in March 2023 for further discussions.
Both deals will come into force 30 days after countries have passed the supporting legislation has been passed by their respective parliaments.
Duty free access
The agreement with India, once implemented, will provide duty-free access to the Australian market for over 6,000 broad sectors of India, including textiles, leather, furniture, jewellery and machinery.
Labour-intensive sectors such as machinery, electrical goods and railway wagons will also benefit from the agreement.
Under the pact, Australia is offering zero-duty access to India for about 96.4% of exports (by value) from day one. This covers many products that currently attract 4%-5% customs duty in Australia.
India’s goods exports stood at $8.3 billion and imports totalled $16.75 billion in 2021-22.
Commerce and Industry Minister Piyush Goyal had earlier stated that the agreement would help in taking bilateral trade from $27.5 billion at present to $45-50 billion in the next five years.