2022 has the potential to be more than just a turn of page on the calendar. It may just be the seminal year that defines human civilisation in the contemporary era, owing to the massive reset of our lives over the last two years.
Perhaps the most stark and abiding impact of the pandemic is the accelerated technology adoption across the board; be it an individual in a mofussil area or government departments, a 7-year-old or a 70-year-old, an SME or a global MNC. While at the individual level, we learnt the importance of achieving work-life balance, as organisations we learnt to deploy our resources judiciously to drive efficiencies; further health and return to society have emerged as key focus areas for both.
Without question, the pandemic caught the global economy and the governments off guard, but the coordinated efforts of various central banks helped us to sail through and we are now on track for a sustained recovery; with world GDP expected to hit the $100-trillion mark in 2022, two years ahead of schedule. While the U.S. is leading the rebound currently, India will remain the beacon of global growth this decade and is expected to be the third largest economy by 2030.
The central government has done exceedingly well to push through with vaccinations as well as the reform agenda. This has addressed two key concerns — of business continuity and business confidence. The central bank has done a great job at balancing the twin objectives of inflation and growth, which is now evident in the form of global investor confidence. The key challenge for 2022 will be sustaining this rebound in growth while central banks unwind loose monetary policies and that is where governments will have to ensure they do not hurt the animal spirits of entrepreneurs.
Back home, the recurring question surrounding the Indian growth story has been about revival of capex. India’s last capex cycle ended around 2010-2011 and since then it had been in a stop-start phase until 2020. Even in the recovery of the last one year, the missing pick up in credit offtake has been a cause of concern for many, but to me it is logical that corporates used improving cash flows to first deleverage. With capacity utilisations now above 70% and volume offtake improving across industries, the start of a new capex cycle for private corporates is inevitable and we expect to see proof of this in 2H2022. The rural economy seems to be the only weak spot, in this otherwise encouraging macro, due to wage inflation and lukewarm agricultural output this year.
Perhaps the most exciting development in 2021 was the coming of age of Indian technology companies. Traditional service providers further gained market share and several new ones got listed on Indian exchanges. While fintech has been the most sought-after segment, there has been a lot of interest in health tech, edtech, e-commerce and software solutions. In 2021 alone, India added 42 unicorns, versus 37 in the decade between 2011 and 2020; and in the process we surpassed the U.K. as the third largest unicorn hub globally. This trend should gain further momentum in 2022 due to increased visibility of the Indian startup ecosystem and sky-high confidence of Gen Next; and I believe that unicorn will no longer be the buzzword, 2022 will be the year of decacorns.
Another theme, that is likely to dominate discussions in boardrooms, investors’ minds and even the main street in 2022 is sustainability. Environmental concerns have started to receive much deserved attention from governments and regulators; and with investors increasingly becoming ESG-conscious, corporations and lenders are also seen rapidly imbibing this theme into their plans.
I believe that the pandemic will become endemic by the second half of 2022, and India shall emerge as a key cog in the global economic wheel of sustainable growth.