India’s economic growth sustained by domestic resources: Patra

Mumbai: India’s rapid economic growth is sustained by domestic resources rather than foreign capital, former RBI deputy governor Michael Patra said in a speech delivered against the backdrop of external challenges, including tariffs imposed by former US president Donald Trump.“India’s self-finances its growth and doesn’t depend on foreign capital for its investment,” Patra said. “This is a major plus because we generate our own resources for growth. Hence the current account deficit, which is quite simply exports minus imports, is just 1% of GDP.”Patra pointed out that India’s foreign exchange reserves, at close to $700 billion, are the fourth largest in the world. “This shows up in the exchange rate, which is one of the most stable currencies in the world today,” he said. He was speaking at the Ashwamedh - Elara India Dialogue event in Mumbai on Monday.Tracing India’s performance after the pandemic, Patra said, “So after that break from 2021 onwards, there was a cyclical rebound. If one takes the time period from 2021 to today, the average growth rate of India is 8%.” “There was a cyclical correction last year when growth went down to 6.5%, but that was just a correction. Already we are heading back towards the 8% growth,” he said.Comparing India’s growth with the rest of the world, Patra noted, “In 2022 India was the fifth largest economy of the world in terms of GDP measured by market exchange rates.” According to IMF estimates, India is contributing “16% of global growth — that is one-sixth of world growth — the fastest growing nation in the world now.”Patra underlined India’s long-term potential. “The OECD has estimated that somewhere in the mid-2040s, [India] will overtake the United States to become the second largest economy in the world from being the third largest,” he said.Patra also drew attention to challenges, including low labour force participation, weak infrastructure, and underdeveloped manufacturing. “India has one of the lowest contributions in the world from labour to GDP. This requires serious reforms,” he said. On infrastructure, he observed, “We are investing 3.5% of GDP. If we can raise this to 6%, the gap will close.”Climate change, Patra warned, is the most formidable headwind. “India is the most exposed to climate change, whether we like it or not,” he said. Rising sea levels, glacier melts, and extreme weather, he noted, are already visible risks.