A day after the RBI retained the GDP growth projection for current fiscal year at 6.5 per cent on the back of supportive domestic demand conditions, the Chief Economic Advisor Dr V Anantha Nageswaran on Friday asserted that the Indian economy is expected to grow in a range of 6.5-7.5% in the current fiscal buttressed by a strong growth momentum seen in investments and efficiency gains from rapid pace of digital transformation. He was speaking at the Plenary Session on ‘Mission US$9 trillion Indian Economy by 2030’ organised by CII at Lucknow as a part of Industry interaction on Building a Resilient Economy in Lucknow.
Economy in an auto pilot mode; most parameters doing well: CEA
The economy is in a state of autopilot, bouncing back impressively after the pandemic, and in all probability the FY23 GDP growth rate of 7.2% will be revised upwards in the subsequent data revisions, he added.
Sharing his optimism on the medium-term growth prospects of the Indian economy, Dr Nageswaran highlighted that the sound macroeconomic policies of the government, structural reforms such as GST, IBC thrust on infrastructure and digitalisation has ensured that the Indian economy can grow for a longer period without running into overheating problems. “Between now and 2030, based on what we have done so far without even assuming that further reforms will be done, I can say that we have the potential to grow steadily between 6.5-7.0% and if we add the additional reforms on skilling, factor market reforms among others, we can go upto 7.0-7.5% and possibly even 8%”, he further added.
On capex, he noted that the private sector is poised to attain stronger investment growth following the strengthening of corporate balance sheets, stronger bank balance sheets which has improved their ability to lend and support from the government’s capex push. Over the medium term, investments will remain a key driver of growth. The uptick in investments will drive the manufacturing output too, in addition, to factors such as “expansion of public digital platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes”, added the CEA.
Private consumption, which contributes close to 60% to GDP, has surpassed the pre-pandemic trend in the third quarter of last fiscal contributed by release of pent-up demand and recovery in rural demand, noted Dr Nageswaran. Going ahead, lower inflation outlook due to easing commodity prices, good harvest and pass through of lower input costs, will have a salutary impact on boosting the consumption spending further this fiscal.
On the sightings of green shoots of recovery in rural demand, the CEA highlighted that an increase in Minimum Support Price (MSP) for major crops and a rise in the MNREGA wage rate are expected to improve the financial security of rural households further and boost rural demand in the coming months.
Alluding to the need for fiscal prudence for fostering macroeconomic stability, Dr Nageswaran said that a better credit rating translates into lower cost of borrowing by the government, thus contributing to a fiscal stimulus for the economy.” Good fiscal health on our part is a good fiscal stimulus for consumers, and we are working towards it by focussing on measures such as asset monetisation among others. The natural rate of growth economy should help as well”, he stressed.
He added that the States have done well too on the fiscal front, with their aggregate fiscal deficit expected to come at around 3% of GDP in FY23. “Increased digital integration through measures such as mandatory electronic tax filing & better e-services provided to taxpayers have brought fiscal gains to the government”, he further added.
Responding to the query of an industry member on TCS under LRS, Mr Raman Chopra, Joint Secretary, CBDT, Ministry of Finance mentioned that government will soon come out with FAQs to address questions on the various aspects of imposition of TCS on foreign remittances under the Liberalised Remittance Scheme (LRS).
Mr. Sanjiv Puri, President Designate, CII and Chairman & Managing Director, ITC Limited, in his introductory remarks highlighted that the government’s mantra of continuous reforms, will catapult the Indian economy to a grow at a higher CAGR of 7.8% in the next decade from 6.6% in the previous one.
Mr Madhav Singhania, Deputy Chairman, CII Northern Region and Joint Managing Director, J K Cements Ltd, noted that the government’s singular focus on implementing reforms and on improving ease & cost of doing business will help India leapfrog to a higher growth trajectory over the medium-term. Mr Akash Goenka, Chairman – CII UP and Director – Goldiee Group, in his concluding remarks concurred with Mr Singhania’s observation.