Expressing optimism about India’s growth prospects, NITI Aayog Vice Chairman Ashok Kumar Lahiri said the Indian economy has been doing reasonably well and that Asia’s third-largest economy will regain its mojo and return to a current account surplus soon. He said the major challenge the Indian economy faces is the low share of manufacturing in India's overall Gross Domestic Product (GDP). India’s economy grew at a faster-than-expected 7.8 per cent in the April-June quarter, showing resilience despite concerns that the war in Iran and resulting global uncertainty could weigh on domestic economic momentum.
On foreign investment in India, Lahiri said domestic savings, rather than foreign savings, must do most of the heavy lifting. He explained that in the early part of the 19th century, the United States imported capital from Europe, while East Asia consistently ran current account surpluses because it attracted foreign direct investment (FDI) and foreign portfolio investment (FPI). However, most of the investment was financed by domestic savings.
He said, “Normally, when GDP goes up, the share of agriculture goes down, and the share of industry, which includes manufacturing and some other sectors, and services goes up. But if you look at developed countries, manufacturing has gone down, but it has gone down at a much higher per capita income than what was threatening to be a problem.” He pointed out that India’s recent GDP data shows that the share of manufacturing in GDP has increased. He added, “But we need much more manufacturing now.” He said the entry of foreign players into the country and the investments taking place in renewable energy, data centres, semiconductors and electronic manufacturing are very positive developments.
