India’s chief economic advisor V. Anantha Nageswaran termed the first quarter GDP growth of 7.8% as a “good number” and said that the government is comfortable maintaining GDP growth target of 6.5% for FY24. He was addressing the media after government released April-June quarter GDP data which showed that India’s economy grew at its quickest pace in a year in the April-June quarter, buoyed by strong services activity and robust demand.
Gross domestic product (GDP) expanded 7.8% on an annual basis in the second quarter of 2023, accelerating from 6.1% growth recorded in the first quarter and topping a 7.7% forecast in a Reuters poll.
The chief economic advisor also said that high frequency indicators for July show that the economy is off to a good start in the second quarter and all indicators point at the continuation of good growth in the services sector in the coming quarters.
Nageswaran said that the food inflation, which had surged recently, is likely to subside with arrival of fresh stock and government measures but the impact of deficient rains in August needs to be watched.
He also pointed to the rising crude prices, geo-political uncertainties, and tighter global financial conditions as factors that could pose a risk to India’s growth.
The risks to the FY24 GDP growth forecast of 6.5% are evenly balanced, he added. On the government expenditure side, the chief economic advisor said he does not see the threat of 5.9% fiscal deficit target for FY24 getting breached. Data released today also showed India’s fiscal deficit for the first four months of the financial year that started April 1 touched 6.06 trillion Indian rupees, 33.9% of annual estimates.Separately, government data released today showed India’s infrastructure output in July rose 8% year on year with expansion across all sectors. Infrastructure output, which comprises eight sectors including coal and electricity, accounts for nearly 40% of industrial output. In July the coal sector output grew 14.9%, steel production jumped by 13.5% and the cement sector achieved 7.1% output growth.
Here is what the chief economic advisor said:
Govt’s sustained capital expenditure push is crowing in private investments
New investment projects announced by the private sector in the June quarter were the highest in 14 years. Private investment is not waiting to take off but it has already taken off
There is no real concern that inflation will spike out of control. Both the govt and the RBI are taking measures to control inflation. Core inflation is declining and spike in food inflation is transitory
Credit growth remains high
There is a greater focus on expenditure management. Fiscal deficit up to July is also driven by Covid-related expenditure
Current account deficit is well within the tolerance level. Slowdown in merchandise exports is partly offset by a rise in services exports
Several high-frequency indicators for July signal a good start to the second quarter of FY24
Growth prospects appear bright, though external factors pose a downside risk. Investment and consumer momentum will underpin solid growth prospects for the coming year
At the moment, both the govt and the central bank are comfortable with the 6.5% growth projection for FY24
Indian real estate sector is expanding; not feasible to conclude if the real estate problem in China would benefit the Indian realty sector
Very difficult to quantify benefit to India from China’s slowdown
Don’t see any threat to the 5.9% fiscal deficit target for FY24
All indicators point at the continuation of good growth in the services sector in the coming quarters
