Despite remaining among the fastest growing major economies, India will face some slowdown as it is not decoupled from the world, HDFC Ltd Chairman Deepak Parekh said on Monday.
He believes the country can grow from a $3.4 trillion economy to a $7.5 trillion economy within the next 5 years.
“India is not decoupled from the world and India too will face some slowdown. But there is a consensus across the board that India will still remain amongst the fastest growing major economies in the world,” Parekh said, while addressing the World Congress of Accountants.
Many countries are facing recession fears as central banks across the globe are tightening their monetary policies to tame high inflation.
India’s GDP growth for 2022 may be slightly lower than 7 per cent but that is no reason for disappointment, Parekh said, adding that, “What is important to note is the inherent resilience that is now embedded in the Indian economy.”
He said amidst an uncertain global backdrop, India currently is among the very few countries globally that has more tailwinds than headwinds.
“India is a conspicuous exception against stalling global growth,” he noted.
As per a recent research report, by 2031, the country’s per capita income is expected to rise from $2,300 currently to $5,200, share of services in GDP to grow from 55 per cent to 64 per cent and the domestic stock market could be the third largest with a market cap of $10 trillion, he said.
The number of households with $35,00 per annum would rise five-fold from 5 million currently to 25 million by 2031, he added.
Speaking on the global monetary tightening, Parekh said for central banks the world over, price stability is critical, and so there is a spate of rate hikes. Monetary policy actions are likely to continue to follow the ‘higher for longer’ mantra.
“This means prolonged high inflation along with aggressive interest rate hikes by most central banks as they endeavour to tighten money supply and restore price stability,” he said.
Parekh said the conundrum for central banks is determining the fine balance between front loading interest rate hikes to curb inflation, while ensuring that such actions do not end up choking economic growth.
“If central banks stop increasing rates too early, they risk inflation rising further. If they overdo the rate increases, it could stall economic growth,” he said, adding that the central banks have a tough role ahead as they try to avoid a hard landing.