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2019-09-24 / HFE Team

The Indian Economy: Weathering the Storm for a Bright Future

In the recent past there has been much focus and attention on the budget, state of the economy and now Article 370 that the wonderful work done by ministry of finance in its economic survey has been forgotten.

The economic survey highlighted that sustained economic growth results from a virtuous cycle of savings, investments, exports growth with investments as the key driver.  The survey listed out the necessary ingredients for creating an environment of investment led growth in a dynamic and unpredictable world. Legal Systems and contract enforcement, consistency of policy making, healthy financial sector, encouragement to innovation and entrepreneurship all are critical for this environment.

Energy is crucial for development and growth. As India’s GDP grows the per-capita energy consumption must go up.  India’s per capita energy consumption is 1/3rd of the global average. For India to become an upper-middle income country, the energy consumption must go up by 2.5 times. This requires “larger number of energy resources at an increasing rate”. There is a strong linkage between human development and access to energy. However, access to energy also has to happen in such a way that impact on environment is minimised. The decentralisation and democratisation of energy enabled by renewable power has the potential to exponentially electrify and decarbonise the economy. It was heartening to see the recognition of this fact and the renewed commitment, focus and thrust on India’s renewable energy sector. Electric Vehicles is another focus area of the government and it has made its intention clear to propagate EVs through various policy announcements.

Meeting government renewable energy targets over the next decade would require an investment of USD 30 billion per year in the sector. What is required is an environment conducive for investment led growth as I mentioned earlier. Consistency of policy is another factor critical for investors to commit their resources. EVs have been one case in point. But now it’s clear in its recent policy announcement and budget allocations, that the government is taking definite steps forward towards a greener transportation. 

There might be a few negative short-term episodes but such cases are inevitable and the self-correcting market economy will eventually handle them. The survey has given me lot of assurance and confidence in the direction of our economy and the RE sector in particular. While recent events in the sector might paint a gloomy picture but I can see the silver lining behind the dark clouds.

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