India: strong from the ground

It’s easy to be upbeat about India.

The impact of China’s emergence two decades ago is still being felt on markets, and while comparisons should be avoided, there’s something inexorable about the India story that gives a sense of deja-vu.

I’m currently in India and there are some key economic markers which immediately jump out to any visitor.

The first and most obvious is the traffic. It’s what you expect to experience given India’s vigorous economy, but so are the efforts to deal with that challenge.

Construction is so widespread it’s difficult to appreciate unless you see it. You can’t run a crane count because you lose track. And as a visitor over nearly 20 years, the last two years on this score have been very different from any others I have seen. 

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The next thing you notice is the tone on the ground is quite upbeat. Regular visitors to India may think that’s nothing new. But the tone of reservation, of focussing inwardly on the worst of India’s challenges, has given way to something different.

Growth is quite broad-based, the banking sector is in good health, and the central bank is very close to the end of its tightening cycle.

There are of course challenges, largely around imbalances in the supply side of the economy. The household saving rate has fallen to the lowest in 16 years and the trade deficit is quite elevated. Understanding the challenges is also the first step in dealing with them.

Next is how India is building its own income streams – one of the key factors that separates India’s growth from China’s. Measured by the number of employees, India now has one of the largest banking sectors in the world. That’s quite amazing.

A key backbone of the sector is India’s world-leading digital public infrastructure. In the post-pandemic period, banks from all corners have been boosting their resources in India.

India is a little China-like in one regard though: scale. Visiting office compounds that can seat 100,000 employees can be pretty humbling.

If you haven’t visited India recently, I encourage you to do so soon. There’s plenty happening.

Richard Yetsenga is Chief Economist at ANZ