While the report noted that no single country can replicate China’s success in manufacturing, it said India could benefit from supply chain shifts and reforms, which could also result in job creation.
“Growth could rise to 6.25-6.75% YoY by 2030 under an optimistic scenario and 6.75-7.25% YoY under a blue-sky scenario, leading to job creation,” Tanvee Gupta Jain, chief India economist, UBS, said.
The report pointed out that Vietnam and India are key contenders, given their advantage in low-cost manufacturing, scale and infrastructure.
For the near term, the UBS economist noted that a broad-based recovery is yet to occur.
“Despite reasonable headline growth, underlying economic recovery post-pandemic remains uneven when looked at in terms of rural-urban divide; manufacturing vs. services growth; and/or affluent vs. lower-income household demand,” Jain said.UBS has forecast that growth could slow to 6.1%, compared with 7.2% in the previous year. It pointed out that a favourable base effect will help growth reach 7.5-8% in Q1, after which the momentum will fall, with growth averaging 5-6% for the rest of the year.”Capex growth has largely held up on higher government capex and demand for residential real estate holding up. However, the pick-up in private corporate capex remains gradual,” the report said.
The RBI has set a growth target of 6.5% for FY24 and inflation of 5.4%.
UBS estimated inflation to average 5.4% for the year but noted that elevated vegetable prices would keep inflation above 7% in August.
