India’s Chief Economic Adviser, V Anantha Nageswaran, expressed optimism about the country’s economic growth, stating that it may surpass the initial estimate of 6.5% for the current fiscal year. This positive outlook follows a higher-than-expected GDP number in the fourth quarter of 2022-23, with India’s economy growing by 6.1% in the January-March period. Nageswaran attributed this growth to improved performance in sectors such as agriculture, manufacturing, mining, and construction.
According to Nageswaran, India was the fastest-growing major economy in the last fiscal year and continued to show strong growth in the quarter ending March 2023. This growth was driven by robust private consumption and increased capital formation. High-frequency indicators for various sectors, including industry, services, external trade, fiscal indicators, and credit growth, are all pointing towards sustained momentum in the Indian economy.
While external factors pose some downside risks, such as geopolitical situations, oil production, and potential monetary tightening in developed countries, Nageswaran emphasized the positive impact of expanding public digital platforms, improving last-mile connectivity, and implementing logistics reforms. These efforts, combined with increased investment in infrastructure through public capital expenditure, provide important buffers against external risks.
Nageswaran also highlighted the significant contribution of private sector capital formation, as seen in the March financial numbers of the corporate sector. Gross Fixed Capital Formation (GFCF) reached a 10-year high of 35.3% in the fourth quarter of 2022-23, with private sector investment being facilitated by public sector investment.
Looking ahead, Nageswaran expected the private sector to continue expanding its investment plans, given the increasing capacity utilization in sectors like steel and cement. Additionally, he mentioned that the rise in Minimum Support Price (MSP) for major crops and the wage rate under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) would enhance the financial security of rural households and boost rural demand.
Regarding inflation, Nageswaran projected that it would trend towards 4%, supported by subdued commodity prices and favorable crop production. He expressed confidence that the consumer price index inflation rate would move closer to the Reserve Bank of India’s target midpoint of 4% during the current financial year. In April 2023, retail inflation decreased to an 18-month low of 4.7% due to lower food and core inflation.
In conclusion, Nageswaran expressed satisfaction with India’s sustained economic momentum, along with macroeconomic, financial, and fiscal stability. He anticipated another year of solid economic performance for India, aligning with Reserve Bank Governor Shaktikanta Das’s expectation of growth exceeding the advance estimate of 7% for 2022-23.
