Over the past year, global supply chain reconfigurations and rising geopolitical tensions have led to a sharp contraction in international trade volumes, particularly in high-tech manufacturing sectors. Export-dependent economies such as Taiwan and South Korea have seen their export revenues decline significantly due to weakening demand for consumer electronics in Western markets and trade restrictions on advanced microchips.
In contrast, India's macroeconomic outlook remains relatively robust, with the Reserve Bank of India projecting GDP growth of over 6% for the upcoming fiscal year—significantly outperforming its highly export-oriented regional peers.
India's resilience is largely attributed to its massive domestic market. Private consumption, which accounts for over 55% of India's GDP, has been bolstered by a growing middle class, rising urban wages, and stable domestic inflation. Furthermore, the Indian government has accelerated its capital expenditure on domestic infrastructure projects, such as highways and renewable energy grids, insulating the economy from external shocks.
While Taiwan and South Korea grapple with falling net exports and excess manufacturing capacity, India’s domestic-led growth model has acted as a buffer, though some economists warn that persistent global stagnation could eventually drag down domestic business confidence.
Explain one likely reason why 'the Reserve Bank of India projects India to achieve higher GDP growth than highly export-oriented regional peers such as Taiwan and South Korea' (Extract C).
