National Statistical Office (NSO) has followed RBI in revising upwards economic growth projections for the current fiscal. Crucially, the NSO estimate that informs GoI’s budget-making sees the economy gaining momentum over 2022-23, where the central bank foresees loss of steam. Since the prime driver of growth in 2023-24 is investment, the budgeting exercise will be sensitive to slackening the pace of government capex, as the runway for reviving private investment lengthens with consumption growth slowing to decadal lows. Monetary policy will, likewise, not be in any rush to cut back on interest rates having delivered an extremely soft landing for the economy. RBI will have more elbow room to anchor inflation.Putting the lid on inflation would be a prerequisite for reviving consumption that is being dragged down by the first serious slippage in agriculture growth since the pandemic. Manufacturing is expected to offset this. But it faces headwinds from slowing domestic consumption and exports. Services are normalising after a rollercoaster couple of years, and provide strong underpinnings to baseline GDP growth. The deficits -fiscal and current account – will recalibrate marginally on the latest growth projections. The necessary adjustments should not call for any exceptional policy response on welfare spending or exchange rates.India’s macro management is delivering on both growth and inflation at a time large parts of the world economy are uncertain on either variable. This strengthens the case for policy continuity piquing the interest of international capital. If India manages to sustain interest, it could ratchet up its potential growth rate. These initial estimates hold out the possibility of the economy speeding up amid a global slowdown. Even holding on to its pace is a remarkable achievement. That is a compelling narrative for investors. The most likely cause – and one that investors ought to be very comfortable with – is that India has built resilience into its post-pandemic recovery.
