The secret of Indian economic growth
Egypt and India have much in common. Mahatma Gandhi and Saad Zaghloul already had a common goal: the independence of their countries from British occupation. Later, the close friendship between former Egyptian President Gamal Abdel-Nasser and former Indian Prime Minister Jawaharlal Nehru led to a treaty of friendship between the two countries in 1955 and the founding of the Non-Aligned Movement.
Now, it happened for the first time that an Egyptian president attended India's Republic Day as the chief guest, which commemorates the day the Indian Constitution came into force on 26 January 1950. President El-Sisi's visit to New Delhi also coincides with the 75th anniversary of the establishment of diplomatic relations between Egypt and India.
India has always supported Egypt's quest to modernise and develop. Today, bilateral trade between the two countries stands at over $4.8 billion and investment at around $3.6 billion. Cooperation in education and training in various fields is more than just another facet of this relationship. They have deepened the friendship between Egypt and India and strengthened the bonds of mutual support between two peoples who share similar customs and traditions and are working hard to achieve their sustainable development goals despite different challenges. Indian economic and financial policies are in many ways also interesting to observe for Egypt:
The finance minister hands out gifts
In her budget proposal one year before the elections, Indian Finance Minister Nirmala Sitharaman offered something to practically all citizens: The subsidies for the food supply of about 800 million poor people will be cut noticeably, but at now almost two trillion rupees (22.6 billion euros), they will still be almost double the level before the Corona pandemic. The upcoming middle class can breathe a sigh of relief. Taxes are no longer due from an annual income of half a million rupees, but only from 700,000 rupees. The government is increasing the social housing programme by 66 percent - which will also create jobs in the construction sector.
Infrastructure is improved
The leading index S&P BSE Sensex of the Bombay Stock Exchange, however, rose by a good 2 percent, mainly thanks to the increase in infrastructure spending by about a third to now almost 113 billion euros. The government is planning 50 new airports and helipads alone and a rapid expansion of the power grid. The Indian railways, from which Siemens Mobility has just received a major order, will be supported at an unprecedented 27 billion euros.
More cooperation with the US
The roadmap agreed with Washington for much closer cooperation between the United States and India in high technology, especially in computer chips as well as weapons and ammunition, also gave hope to the stock market. Added to this was the announcement that import restrictions on components for mobile phones and lithium batteries would be removed.
To finance the spending, however, the government plans to raise a record €174 billion more in the bond market. With the target for proceeds from the sale of silverware likely to be missed by a wide margin for the fourth year in a row, the minister has lowered the expectation for next year to proceeds of only about six billion dollars. The fiscal deficit will be 6.4 per cent in the coming fiscal year, then 5.9 per cent in the following one, she promised in New Delhi. In two years - between which there will be an election - it should be only 4.5 per cent.
Economic growth stagnates
Due to the global export weakness, however, the government also expects India's growth rate to slow down. Now, Asia's third largest economy is expected to grow in a corridor between 6 and 6.8 per cent. In the fiscal year that is coming to an end, the finance minister estimates that it will be 7 per cent. If the expectations come true, India would remain at the growth rate of 2017 (6.4) and 2018 (6.5 per cent) in the coming months. In the past few years, government economists had regularly assessed India's growth prospects. However, government economists had regularly overestimated India's growth prospects.
Rising domestic demand
Sitharaman expects that weaker external demand could be replaced, at least in part, by domestic demand - but that requires jobs. The International Monetary Fund (IMF) projects a rate of only 6.1 per cent for the country of 1.4 billion people for the coming financial year, and 6.8 per cent for the past financial year. A return to the 6.8 per cent growth rate should then be possible in 2024. The increase in consumer prices is 5.72 per cent. The central bank foresees a corridor between 2 and 6 per cent.