India not decoupled from world and will face some slowdown: Deepak Parekh

India will remain one of the fastest-growing major economies but it is not decoupled from the world and will face some slowdown, said Deepak Parekh, chairman of HDFC Ltd, on Monday.

“I do believe India can grow from a US$ 3.4 trillion economy to a US$ 7.5 trillion economy within the next 5 years. For India, it is the pace of growth that is exciting,” Parekh said at the World Congress for Accountants. India will grow at a slightly slower pace of 7 per cent in 2022, but an inherent resilience is now embedded in the economy.

India’s middle class—number of households with $35,000 as annual income —is expected to rise five-fold to 25 million by 2031 from 5 million, said Parekh while quoting a recent research report. Per capita income is expected to rise from $2,300 to $5,200 in the same time.

“India has a lot going for it right now…I have never been as optimistic about India as I am today,” he said as he listed government reforms encouraging start-ups, rolling out 5G services, and Gati Shakti, a national plan for infrastructure projects.

According to Parekh, India has made strides in digitalisation and financial inclusion. “As a services-driven economy, we are known as the back office of the world and are now positioning ourselves as a high-end manufacturing hub as well”, he said.

About world central banks striking a balance between raising interest rates hikes to curb inflation and yet not choking economic growth, Parekh said the organisations have a tough role ahead. “It’s a case of damned if they do, damned if they don’t”.

With the United States seeing a slight dip in the latest inflation print, markets are hoping that the Federal Open Market Committee may opt for a smaller rate increase of say, 50 basis points in early December, rather than force down a fifth consecutive rate increase of another 75 basis points.

“India, fortunately, has not had jumbo rate hikes, but has followed a more calibrated increase in interest rates”, Parekh said.

The global business ecosystem is entangled in a web of complexity. There are many frictional forces playing out, such as de-globalisation, trust deficit, rising protectionism, broken supply chains, and risks arising from dodgy crypto assets.

“The world is in the midst of a ‘global polycrisis,” Parekh added, citing multiple challenges playing out simultaneously.