Indian Economy’s Vibrant Growth Reflected in Stock Market Surge

New Delhi has been witnessing a strong economic upsurge, with India now standing as the fastest growing economy worldwide. This vibrancy is clear in the robust performance of the stock market, particularly with the BSE’s market capitalization expanding an impressive 300 percent to a staggering Rs 400 lakh crore. Moreover, the Sensex has seen a meteoric rise from 25,000 points to 75,000 points over the last decade under Prime Minister Narendra Modi’s leadership.

The remarkable surge in market valuation has drawn significant attention, with SEBI chairperson Madhabi Puri Buch describing it as “an emphatic vote of confidence by foreign portfolio investors (FPI) in India’s growth prospects.” She highlights the continued FPI investments in Indian equities as an acknowledgment of confidence, despite the price-to-earnings multiples standing higher than many other countries.

Buoyant by the Government’s economic reforms and strategic emphasis on creating a business-friendly environment, there has been a considerable inflow of investments. This influx is not limited to Foreign Direct Investment (FDI) for new industry establishments but also extends to foreign portfolio investments in the stock markets.

Strategic government expenditures directed towards large-scale infrastructure undertakings—such as highways, ports, and seaports—have catalyzed the nation’s Gross Domestic Product (GDP) growth. India’s exceptional 8.4 percent growth rate during the October-December quarter shines especially bright against the backdrop of a general global economic deceleration. This impressive performance has led both the International Monetary Fund (IMF) and the World Bank to revise their growth projections for India upwards, and Finance Minister Nirmala Sitharaman expects the economy to maintain an 8 percent growth trajectory.

Transforming from its past position among the so-called ‘fragile five’ economies, India has soared to become the fifth-largest global economy over the past decade and is confidently progressing towards claiming the third-largest spot.

Another positive indicator for India’s economy is the lowering inflation, now around 5 percent and expected to further decline. This situation fosters a favorable environment for stable economic expansion moving forward.

Strong fiscal discipline, characterized by well-managed deficits thanks to robust tax collection, has solidified the macroeconomic fundamentals. With the government’s borrowing requirements reduced, there is more liquidity available in the banking system for corporate investment funding, an essential factor for controlling inflation.

Despite geopolitical disruptions, such as the Houthi attacks in the Red Sea affecting shipping channels, India’s economic indicators have been promising. Data from the January-March quarter demonstrates resilient exports growth and a decreasing current account deficit, signifying a fortified balance of payments position.

India has also seen its foreign exchange reserves soaring to an all-time high of $645.58 billion for the week concluding on March 29, as per the latest RBI data. This milestone, when considering the central bank’s forward holdings, affords the country adequate cover for over 11 months of imports, a level close to a two-year peak.

Such a build-up in reserves is viewed by RBI Governor Shaktikanta Das as a testament to India’s economic strength. He pointed out that in comparison with other emerging market peers and some advanced economies, the Indian rupee has been remarkably stable throughout 2023-24, exhibiting resilience by staying within a range of Rs 82.8-83.4 per US dollar. The currency’s modest depreciation, at 1.4 percent against the US dollar during this period, stands in contrast to the performance of the currencies from economies such as China, Thailand, Indonesia, Vietnam, Malaysia, as well as from developed nations like Japan, Korea, and New Zealand.

Governor Das’s commentary extends to the rupee’s outlook, expressed in the monetary policy report that foresees continued two-way movements within a close range for the nominal exchange rate of the Indian currency.

In summary, the prevailing wind under the Modi administration has navigated the Indian economy towards a realm of strength and stability, as reflected in the stock market’s exponential growth. The resilience exhibited by a range of economic indicators, including burgeoning foreign exchange reserves and a firm currency, paints the picture of an economy soaring to new heights on the global stage.