India’s long-term economic growth set to stay robust despite global turmoil, say top business leaders

India’s economic growth is likely to remain robust in the long term despite geopolitical turmoil and a row back in globalisation with right policy prescriptions to fuel animal spirits though there may be short term blips, said the country’s top business leaders.

The strength of the domestic economy--derived from its young population, strong banking system and economic policies aimed at bolstering local industries—will ensure that the country overcomes challenges thrown up by global developments, they said at the ET CEO Roundtable on Changing World Order: Time for Cautious Optimism or Embrace of Animal Spirits?

``Good news is great macro, and challenging micro,’’ said Uday Kotak, founder, Kotak Mahindra Bank. ``If you go back to history, there have been times in history where you have to take advantage of the moment of history which is where India is. It is quite exciting, simply because there is so much more to do.’’

2024 is turning out to be the bloodiest since the Second World War as conflicts spread across the world and the established political and economic order is being challenged. Tariffs and backlash against illegal migration have led to violent responses, forcing administrations to roll back many of the policies that fuelled three decades of global prosperity but widened income inequality.

There is ``initial short-term rhetoric in terms of tariffs,’’ said Romal Shetty, CEO, South Asia, Deloitte. ``In today's coupled world, how much ever we think it's decoupled, there are issues. I think there will be some bit of tariffs. Countries are already factoring in for the tariffs.’’

The incoming US president Donald Trump, who has said that ‘tariff’ is his favourite word in the dictionary, has threatened to impose it on China, Mexico, Canada and the BRICS nations group. This has led to the currency markets going topsy-turvy and the return of inflation fears that could slow the reduction in borrowing costs.

The Indian economy has also been slowing. The Reserve Bank of India, haunted by previous episodes of inflation unsettling the economy, has been steadfast in keeping interest rates high to tame prices. While these are on a downward trajectory, inflation has squeezed demand with loan growth falling to 11% last month, from about 20 percent last year.

A tight lending market coupled with stagnant incomes have proven to be obstacles in India achieving its potential growth rate, which economists peg at as high as 8% rather than the 5.4% it delivered in the September quarter.

``No path to growth is linear,’’ said Rohit Jawa, chief executive officer at Hindustan Unilever Ltd. ``It is very important to keep an eye on the long term growth. Job creation needs to pick up momentum.’’

The automobile industry, among the biggest employers in the country and a substantial revenue spinner for the state, has been struggling due to faltering demand as discretionary consumption takes a back seat. Even luxury car makers such as BMW and Mercedes are offering discounts as sales take a hit.

``We are not worried about the short term blip,’’ said Anish Shah, chief executive of Mahindra & Mahindra Ltd. ``India has an opportunity to be a manufacturing hub.

A lot of investments are waiting to come into India, but the country needs to put in place physical infrastructure in the field of judiciary that also helps in getting quick results in case of disputes.

``The judgments, even if they take long, 90% are correct. I think the problem, as a perception of India, it is a tough country to get quick results, comparatively quick results,’’ said Zia Mody, founder AZB Partners, a law firm..

But the biggest hope is from rural India where dynamics and attitude have changed in the past few decades, said Lakshmi Venu, director, TAFE, a farm equipment company.

``The knowledge asymmetry that used to exist between urban and rural is virtually gone,’’ said Venu. ``With cheap accessible data, today the rural customer has access to all the same information. The access to markets has improved. They want to be entrepreneurs. We need to get that animal spirits into rural India.