India forecast economic growth of 6.5 per cent in the upcoming financial year, slowing from the 7 per cent growth projected for the current year, amid prospects of sluggish exports to developed countries in a weak global economy.
While that growth estimate was the lowest in the post-pandemic period, it was higher than the International Monetary Fund’s projection of 6.1 per cent, which would still make India one of the fastest-growing economies in the world.
The prediction came in the Economic Survey tabled by Finance Minister Nirmala Sitharaman on the day before she was due to present Modi government’s last full Budget before the 2024 national elections. “It is going to be a challenge in FY24 to plan out the expenditures due to a short-term slowdown in the economy, high core inflation, and fiscal deficit,” wrote Vinod Nair, Head of Research at Geojit Financial Services.
Chief Economic Adviser V Anantha Nageswaran, who is the author of the Survey, tried to urge economy watchers to look at India’s longer-term prospects.
India’s economy has recovered from the pandemic-induced slowdown and “is poised to do better in the remainder of this decade”, he said in a media briefing on Tuesday.
India’s GDP expanded by 8.7 per cent in 2021-22 after a sharp 6.6 per cent contraction in the previous year due to Covid-19. It had grown by 3.7 per cent in 2019-20, which was partly impacted by the pandemic.
“Recovery of the economy is complete; non-banking and corporate sectors now have healthy balance sheets, hence, we don’t have to speak of pandemic recovery anymore, we have to look ahead to the next phase,” Nageswaran added.
Opposition parties raised concerns over the sharp downward revision in GDP growth estimates for the current financial year and the projections for the next fiscal year.
“At this (rate of) growth, we will achieve (a) GDP of $5 trillion by 2029,” Congress spokesperson Gourav Vallabh said in a statement. “The promise was for 2024.”
Inflation to ease
The government also predicted that inflation would ease in the year ahead due to a likely moderation in commodity prices tied to the slowdown in advanced economies. It did not put a number on it.
“The inflation challenge in FY24 must be a lot less stiff than it has been this year. We expect monetary and fiscal authorities to be as proactive and vigilant as they have been this year,” the Survey said.
The headline retail inflation is projected to accelerate to 6.8 per cent in 2022-23 from 5.5 per cent in the previous year. The Survey stated that retail inflation went through three phases in 2022: a rising phase up to April 2022 when it crested at 7.8 per cent, then a holding pattern at around 7 per cent up to August 2022 and then a decline to around 5.7 per cent by December 2022.
India’s fiscal deficit is projected to decline to 6.4 per cent in the current financial year versus 6.7 per cent in the previous year and a high of 9.2 per cent in the pandemic hit 2020-21.
“While there are talks of a global slowdown, expectation continues for India to be the fastest growing economy in the world. Though inflation has been amplified by geo-political challenges, India should quickly create value based global supply chains so as to attain cost effective growth,” said KPMG India CEO Yezdi Nagporewalla.