Source : Financial Express
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‘Never lose faith in the destiny of India’, the words of Netaji Subhash Chandra Bose have kept the country together through thick and thin all these years. India, which once was considered one of the poorest nations in the world, has emerged as a global leader in recent times. The world’s largest democracy is now heading the G-20 group, extending a helping hand to those in need, spreading the message ‘One earth, one family, one future.’ On the other hand, the Russia-Ukraine war and the Covid-19 pandemic have pushed the economies of India’s smaller neighbours such as Sri Lanka, Pakistan, Nepal and Bangladesh into crises. Most of these countries are struggling to provide even basic amenities like food and electricity to their people. Back in India, while the growth has slowed, the economy has performed much better comparatively, with the International Monetary Fund (IMF) and World Bank projecting the GDP growth of the country to be over 5% in the next financial year.
How economies of Sri Lanka, Pakistan, Nepal, Bangladesh and India are performing
Sri Lanka: Inflation at 54.2%, GDP to fall 4.2% in 2023
Sri Lanka, with a population of over 2 crore, is facing the worst economic crisis since its independence in 1948. The country has defaulted on loans, and is seeking a $2.9 billion bailout from the IMF. The CPI inflation rate in January 2023 eased to 54.2% from 57.2% in December 2022. The World Bank last year said that Sri Lanka’s GDP is expected to fall by 4.2% in 2023. The economic crisis has led to shortages of essential items like food, fuel, medicine, and cooking gas. Sri Lanka’s economy is majorly dependent on its tourism but the Covid-19 pandemic pushed it into the red zone. The root cause of the country going bankrupt lies in the mismanagement by the government, increasing the current account deficit. The deep tax cuts by the previous president Rajapaksa, which were enacted months before the pandemic, wiped out a major chunk of Sri Lanka’s economy. India is helping the country both monetarily and diplomatically to stabilise the situation.
Pakistan: Inflation at 27.55%, GDP to grow 2% in current fiscal year
Pakistan’s economy is on a brink of collapse. The country’s inflation reached its peak in January this year. The CPI inflation in January accelerated to 27.55% from 24.47% a month earlier. The last time inflation was this high in the country was in 1975. The IMF projects a slowdown in the GDP from 3.5% to 2% in the current fiscal. The reason behind the skyrocketing inflation is increasing corruption and the government’s lack of will to eliminate terrorism. The debt situation in Pakistan is really worrisome with its debt-to-GDP ratio revolving around 70%. Pakistan’s total external debt stocks increased from $115.695 at the end of 2020 to $130.433 billion at the end of 2021, according to the World Bank. More than 30% of its total foreign debt is owed to China, according to the IMF. The country’s forex reserves are at a critically low level, falling to $3.1 billion late last month, enough to cover just three weeks of imports.
Nepal: Inflation at 7.26%, GDP to grow 4.7% in FY2023
Nepal’s economy is not in a good shape with its currency value in terms of the US dollar, foreign exchange reserves, banking and financial institution liquidity, government revenue, and employment opportunities all falling to unprecedented lows, while the trade deficit and consumer goods prices have risen. The CPI inflation remained at 7.26% in mid-January 2023 while wholesale price inflation increased to 9.82% on-year. Asian Development Outlook estimates Nepal’s GDP to modestly expand by 4.7% (at market prices) in the fiscal year 2023. The rise in inflation can be attributed to the frequent earthquakes, including the major one in 2015 which led to a loss of over 8000 lives and infrastructure worth over $10 billion and the recent pandemic as the country is majorly dependent on tourism.
Bangladesh: Inflation at 8.57%, GDP to grow 5.2% in FY2023
Bangladesh, the world’s most densely populated country, has been hit hard by the covid-19 pandemic and Russia-Ukraine war. The inflation eased slightly to 8.57% in January 2023 from 8.71% in December 2022. The World Bank recently cut the FY23 GDP growth forecast of the country to 5.2%. The country has taken loans from multiple foreign institutions and the economic crisis may deepen when the payback time comes. Human rights violations and corruption have put the country under the United Nation’s radar. The country which got independence in 1971, with India’s support, has come a long way. From being one of the poorest countries in the world it is now counted as a middle-income country, but if the government doesn’t take the required steps then the World Economic Forum’s statement, “Bangladesh may continue to face sustained inflation, debt crises and severe commodity price shocks in the coming years,” could stand true.
India: Inflation at 5.72%, GDP to grow at 6.8% in FY23
The Indian economy has surprised the world by growing at the fastest pace even as the pandemic and Russia-Ukraine war forced the global economy under severe drag. In December, the retail inflation figure was 5.72%, under the Reserve Bank of India’s (RBI) target range of 2-6%. The International Monetary Fund (IMF), has projected India’s GDP to grow at 6.8% in FY23 and forecasted India to be the fastest-growing major economy in FY24. The country is leading the G-20 group at present and even during the pandemic, provided the Covid vaccine to countries across the globe for free, under the Vaccine Maitri program. India provided humanitarian aid to Ukraine and has helped not only its neighbouring countries but all those in need.
How India emerged as a global leader
Political stability, clubbed with strong foreign policy has played a major role in the development of the country, as it ensures investors and manufacturers that policies will continue for a longer period of time. The introduction of the Production Linked Incentive (PLI) scheme has attracted various international manufacturing giants, who are looking to shift some of their capacities to other countries to reduce dependence on China. While the continuous development in the infrastructure sector has led to a rise in employment, highway connectivity has made the logistics sector witness an uptrend. India has the world’s second-largest army which makes sure that there is no threat to the people as well as the infrastructure of the country, making India a safe investment destination. Schemes like Make in India and Start-up India have pushed the economy upward. The digital revolution has made people’s lives easier, bringing more transparency by introducing projects like Unified Payment Interface (UPI) and Aadhaar cards.