Terming the 5.4 per cent GDP growth in the second quarter as a “temporary phenomena”, FICCI President Harsha Vardhan Agarwal on Thursday said the industry body expects India to achieve 6.5-7 per cent economic growth in the current financial year, while projecting a pick up in private investment.
In an interview to PTI, Agarwal, who is also the Vice Chairman & Managing Director of Emami Ltd, said the RBI needs to manoeuvre a “tight-rope balancing act” between inflation and economic growth, as he opined that the central bank has been doing a prudent job.
Notably, the FICCI President shared that he sees “less of a challenge” for India once the Donald Trump-led administration in the US assumes office next month.
Trump, during his election campaign, had alleged that India, among all major countries, imposes the highest tariffs on foreign products and he had vowed to introduce a reciprocal tax if elected to power.
“Geo-politically now every country is working towards a policy where the primary focus is their interest, their countries’ interest which comes first. But yes, going forward we see less of a challenge for India particularly because a lot of the challenges, what Trump is saying regarding the tariffs etc., might be more for countries like Mexico, China etc.
“Yes, there might be some cases, some areas here or there, where we might face some issues, but broadly, in fact I feel there might be many areas where opportunities might be thrown up for Indian industries,” Agarwal said.
According to him, investment in capital expenditure by the private sector in India should pick up going forward, with the level of capacity utilisation reaching almost 75 per cent.
“Our assessment is and what we have seen is, around 74-75 per cent (level of capacity utilisation) the private companies, the industry, is very much now comfortable looking at the new investments. So from that perspective we believe private investment should pick up,” the FICCI President said.
Sharing FICCI’s wishlist for the upcoming Budget, Agarwal said the chamber has recommended that the government should increase its capex by 15 per cent next fiscal.
Besides, he said, FICCI has also suggested tax reforms including simplification of TDS (tax deducted at source) rate, and a boost in the budgetary allocation towards green energy and circular economy.
“Our assessment is and what we have seen is, around 74-75 per cent (level of capacity utilisation) private companies, industry, is very much now comfortable looking at new investments. So from that perspective we believe private investment should pick up,” the FICCI President said.
He further said “it is a tightrope balancing act which the RBI needs to do and they have been managing it quite well. Inflation has to be controlled because otherwise it has an impact on the consumption… It is a balance that RBI has to do between inflation and (economic) growth. They (RBI) have been very prudent in this regard”.
Agarwal, however, noted that “from the perspective of growth rate, I think the RBI has brought down the expected growth rate to 6.6 per cent for the current year. Q2 was a temporary phenomena (5.4 per cent GDP)… We don’t expect this kind of a growth rate in Q3 and Q4.
“We believe that Q3 will be significantly higher than Q2 and even in Q4 and on an average yearly, we still expect somewhere around 6.5 to 7 per cent GDP growth for this fiscal”.
The Reserve Bank has significantly lowered the growth projection for the current fiscal year to 6.6 per cent from 7.2 per cent earlier and hiked the inflation forecast to 4.8 per cent in view of slowdown in economic activity as well as stubborn food prices.
India’s GDP growth fell to a 7-quarter low of 5.4 per cent in July-September period of current financial year 2024-25, as against RBI’s own projection of 7 per cent.
