 "Anantha Nageswaran")
Indian economy ticks many boxes in the right way and continuing to grow, chief economic advisor (CEA) V Anantha Nageswaran said on Thursday, asserting that there is a case for the global rating agencies to reappraise their estimates of India's potential growth rate to 7 per cent.
Speaking to the media on the GDP estimates, he said the actual performance of the Indian economy has continued to defy expectations, underscoring that a structural transformation of the economy is underway, both in terms of physical and digital infrastructure.
“Overall, the economy ticks many boxes in the right way, continuing to grow at around 7 per cent,” he said.
He said there is a case for the rating agencies to re-evaluate their potential growth projection for India to closer to 7 per cent, if not more.
“High-frequency indicators point to continued good performance in the fourth quarter, the current financial year... That is a good sign for the momentum to continue,” Nageswaran said.
The industrial growth rate has now picked up with sectors such as mining, manufacturing and construction performing well and giving the economy a better balance in growth. Slight downward revision in the previous year's GDP growth number from 7.2 to just about 7 per cent has given an advantage of the base effect in this year’s numbers, he said.
With emphasis on capital investment beginning to crowd in the private sector, Nageswaran said the private sector capital formation is not a story for the future, but “a story that is unfolding as we speak.”
Noting that while the agriculture sector’s performance in the first nine months of the current financial year has been lackluster due to erratic monsoon, the CEA said the sector is expected to rebound in FY25, which would also boost rural incomes.
“The predictions of withdrawal of El Nino also make the case for normal monsoon in the next calendar year, as well as good harvest both for kharif and rabi crops next year,” he said, adding that the rural demand growth and rural income growth maybe even better and more evident in FY25.
“The story is one of rising purchasing power and reduction in the poverty headcount ratio, as well as a better distribution of consuming power in the hands of the population more so in rural India than in urban India,” Nageswaran said.
The food inflation has been coming down, but the share of spending on food has declined as per the latest Household Consumption Expenditure Survey, he said, adding the poor are shielded from food price rise through the provision of free food grains under the PM Garib Kalyan Anna Yojana.
“Inflation is expected to go down and boost consumption,” Nageswaran said.
The private capital growth would sustain on the back of the improvement in infrastructure facilities and reasonable tax, interest rates and nurturing policy environment. The slight reduction in GDP for private final consumption expenditure from 58 per cent to 55 per cent plus is not a sign of distress but signals that the demand growth in the economy is more evenly distributed than before, he said.
Nageswaran said that slightly lower growth in the hospitality sector in the April-January FY24 compared to the previous year is more a sign of stabilisation rather than any underlying weakness.
“It is coming off a very strong recovery in FY22 and FY23,” the CEA said.
Global demand has been a challenge, given uncertain global growth, Nageswaran said. He, however, added that the overall trade balance and the deficit are shrinking.
“The external sector is showing no signs of vulnerability, despite the poor performance of exports because of global demand conditions,” he added.
