India may achieve 8% GDP growth for FY24, says chief economic advisor

Indian Economy

India's Chief Economic Advisor V Anantha Nageswaran on Wednesday, May 8, said the possibility of growth touching 8% in the fiscal is quite high. "India is aiming at maintaining growth in the 6.5-7% range in the coming years," he said. The International Monetary Fund had recently pegged India's growth projection for FY24 at 7.8%, slightly more than the government's projection of 7.6%.

If the growth remains above 7%, this would be the second consecutive year after COVID-19 that the economy would have grown over 7%. As of now, the IMF estimates a 6.8% for FY25, lower than the Reserve Bank of India's expectation of a 7% growth. "If FY25 growth projection of RBI turns out to be correct or even an underestimate it would be the fourth consecutive year of 7% or higher growth rate."

India's gross fixed capital formation (GFCF) declined for two years. However, the CEA highlighted that there has been a significant pickup in FY22 and FY23, and the trend continues in FY24. GFCF represents the total value of physical assets (such as machinery, equipment, buildings, and infrastructure) produced for use in the production process over a specific period within an economy. It measures the net increase in the stock of fixed assets in an economy.

Nageswaran said, "An ideal growth rate for the economy will be between 9.5% and 10% like China's for over three decades after 1979 but the geopolitical context has shifted and, therefore, we need to be able to grow on the basis of domestic economy strengths, and whatever impediments are still there, we should look to remove them.”

According to the CEA, the tax GDP ratio has been improving steadily, which is commensurate with the per capita income, in line with nominal GDP growth. He stressed that there is a need to allow the organic evolution of these trends. "At the moment inflation is well within RBI reference range; with normal monsoon inflation to head to target range."

Compliance burdens, rules and regulations at the state level need to be worked on for manufacturing to grow. "The economy is better placed than before to pursue non-inflationary growth," he said.

The CEA highlighted that the private sector has come off its balance sheet. There has been a shrinking in the net savings surplus for the private corporate sector, which implies that they are investing. On the other hand, households seem to be saving less but savings are channelised into physical assets. The external sector balance, CEA said, remains quite comfortable.

Also Read: India's April fuel consumption climbs up 6.1% year-on-year

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