Baskadia

India's Economic Crisis in 2023

The year 2023 could be a defining period for India's economy as the nation faces one of its biggest economic challenges ever. With rising inflation, a weakened currency and sluggish growth, the Indian economy is struggling to cope. With global markets remaining volatile, the Indian economy is no stranger to the risks of a major crisis.

The root of India’s economic woes lies in its debt crisis. India’s government debt is nearly 70% of its Gross Domestic Product (GDP), making it one of the highest among emerging economies. The debt crisis has a domino effect on India’s other economic sectors, resulting in weak investment, inflation, and less consumer spending.

Furthermore, India's currency, the rupee, has been on a downward trajectory in recent months, hitting a record low against the dollar in August 2020. The falling rupee's downfall has been caused by several factors, including a high current account deficit, weak capital inflows, and a weak global economic outlook. India's weakening currency has also hurt imports, resulting in higher levels of borrowing by the government to finance its current account deficit.

The high level of government borrowing has taken a toll on India’s already weakened public sector banks, making it difficult for them to lend. This has had a ripple effect on economic activity as companies, both large and small, struggle to access loans for business investments and expansion.

By Rahat Ali Jafri