The report highlights three trends likely to "be with us in the coming years".
The Indian economy is likely to grow at over 7 per cent in the next few years and the country is set to become the third largest economy, the government has said in a report, "The Indian Economy - A Review" ahead of the interim Budget.
The report gives an overview of the economy, in place of the Economic Survey, which will be presented only with the full Budget after the national elections.
The report highlights three trends likely to "be with us in the coming years".
*The era of hyper-globalisation in global manufacturing is over, the report says. "It does not mean that de-globalisation will be upon us any time soon, as countries are only now discovering the enormous integration of global supply chains that have taken place in the last few decades," it says. So, an alternative to the globalisation of supply chains will take much longer to emerge, if it ever does, the report predicts. However, that will not deter governments from pursuing on-shoring and friend-shoring of production with a consequent impact on transportation, logistics costs, and, hence, the final prices of products.
Recent events in the Red Sea may have brought back concerns over reliance on global supply chains, further aggravating the slower growth in global trade in 2023. In other words, exporting one's way to growth will not be easy. This reinforces the need to lower logistics costs and invest in product quality to hold on to and expand market share in areas where India has an advantage.
*Artificial Intelligence is another big trend to watch out for, the report says. "Closely related to this challenge is the advent of Artificial Intelligence with the profound and troubling questions it poses for growth in services trade and employment since technology might remove the advantage of cost competitiveness that countries exporting digital services enjoy," it says.
*The third trend, and arguably the most important, is the energy transition challenge, the review says.
Concerns over rising temperatures have led to a single-minded focus on reducing carbon emissions amidst the determination that the emission of greenhouse gases, particularly carbon, is the most significant factor. This has led to persistent demands from international organisations and advanced nations on developing nations to wean themselves off fossil fuels and switch to greener energy even as technological and resource obstacles remain and are not on offer from developed countries.
The report says it is a reality that, in the short run, there is a trade-off between economic growth and energy transition. In a growth-challenged post-Covid global economy, countries can ill afford to sacrifice the former for the latter.
India, according to the overview, is walking the fine line between the two more skilfully than other nations, with installed non-fossil fuel-based power generation capacity running ahead of targets. Importantly, India's unwavering commitment to ensuring steady economic growth is generating resources for investment needed for climate change adaptation, building resilience, and mitigating emissions.
The report says the Indian economy is better placed than ever to take on these three key challenges because of the policies adopted and implemented in the last decade.