Moreover, due to persistently high inflation, driven mainly by high food prices, investments and saving of the economy has been adversely impacted. According to the estimates of World Bank, the gross domestic savings rate has fallen to 29.01 as a percent of GDP in 2014 compared to 32 percent in 2011-12. As a result, the gross fixed capital formation also fell to 30 percent (as a percent of GDP), thus contributing to the lower growth of the Indian economy. However, it is important to note that India, which was the second fastest growing economy in the world after China has now replaced China as the fastest growing economy.
The growth in China has slowed down because of the slackening global demand which has led to falling exports for China. The stagnation in European countries has also caused this temporary setback for China. Also, manufacturing has shown sluggish growth in the economy in order to create consumption demand within the economy. It can also be said that this slowing growth has led China on the path of restructuring of its economy.It is important to note that Indian economy is primarily driven by domestic consumption unlike the economies of Japan, Singapore, China and other Asian Tigers, all of whom have followed the export-oriented growth model to drive the economy. Thus, it can be said that the fundamentals of Indian economy are very strong and this will ensure a stable growth rate of around 8 percent in the years to come.
Lately, India’s economy has undergone a huge internal and external restructuring. By the estimates of International Monetary Fund and World Bank, the economy of India will grow at with a GDP of close to 30 trillion USD in 2030 from the current size of 1.8 trillion USD. The export of goods and services has increased manifold in India in the last two decades. Trade of goods and services is considered as an engine of growth for the Indian economy. India is becoming the rising power and the global centre for international trade. The prospects of Indian economy remain bright as the country is expanding in terms of infrastructural growth as well as in terms of its participation in the world economy.