Ride on the India Growth Story

India’s GDP Growth Over the Years

India’s GDP growth rate has shown a remarkable pattern from 1999 to 2024, as depicted in a chart from Bloom Research sources and Jefferies. Most of the time, India’s growth has been in the 7% to 8% range. This consistent growth showcases the strength and resilience of the Indian economy, even in the face of global and domestic challenges.

The Impact of Global Crises

There have been notable exceptions to this steady growth. For instance, during the dot-com bust, India’s GDP growth slipped to nearly 4% to 5% for three years. Similarly, the global financial crisis (GFC) brought growth down to 3%, but the economy quickly rebounded to 7.9%. This quick recovery highlights the underlying strength of India’s economic framework.

Domestic Challenges and Recovery

India has also faced significant domestic challenges. For example, in FY12, a series of interest rate hikes by the Reserve Bank of India (RBI) governor caused a major slowdown, especially impacting MSMEs. Despite these setbacks, the economy has shown a remarkable ability to bounce back, returning to a growth rate of 6% to 7% after each shock, including the disruptions caused by demonetization, GST implementation, and the COVID-19 pandemic.

Comparing India to Other Fast-Growing Nations

Currently, India’s GDP is around $4 trillion, with a forecasted growth rate of 6% for FY24. This is significantly higher than many other fast-growing nations, such as China and Indonesia, and far exceeds the global average of 2.7%. This rapid growth environment underscores India’s potential as a major player in the global economy.

Resilience and Future Potential

One of the most remarkable aspects of the Indian economy is its resilience. Despite multiple shocks over the past two decades, India has consistently returned to its normal growth range. This resilience is driven by high savings rates, prudent entrepreneurs, and minimal dependence on external stimulus. These factors collectively contribute to a robust and adaptable economy.

The Health of India’s Stock Markets

India’s stock markets also reflect this economic health. The majority of the 500 to 1,000 major companies listed are well-managed and have consistently delivered good returns to investors, even during crises. The clean-up of non-performing assets (NPAs) in the banking system has further strengthened the financial sector, setting the stage for significant growth ahead.

A Bright Future for Investors

As the data and trends suggest, India’s economic future looks promising. While external events can always pose challenges, the overall trajectory is positive. This presents a compelling opportunity for investors. Missing out on this growth phase could mean missing a significant part of a 20-30 year growth period, similar to what happened in China and the US in the past.

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