India to clock 6.5% GDP growth in FY 24, meet 5.9% fiscal deficit target: CEA

Amid Congress questioning the Centre on GDP growth numbers, Chief Economic Advisor V Anantha Nageswaran on Thursday (August 31) said the economy is expected to grow at 6.5 per cent in the current fiscal notwithstanding deficient rains in August.

India reportedly recorded economic growth of 7.8 per cent in the April–June quarter of 2023-24 against 13.1 per cent in the period in the last fiscal.

India's economy in Q1 grew at the fastest pace in a year, on the shoulders of a boost in capital expenditure both at central and the state levels, along with stronger consumption demand, especially in rural areas, and improved performance in the services sector, he said. “There is momentum in economic activity in general and it is not driven by price-related distortions. Therefore, our projections still are very comfortably placed at 6.5 per cent for the current financial year,” he said.

Risk is evenly distributed to around 6.5 per cent growth projection for FY2023–24, he said while briefing media in Delhi following the release of first quarter GDP numbers.

Rising crude prices may warrant attention and prolonged geopolitical uncertainty and likely tighter financial conditions with continued monetary tightening can pose challenges to growth, he added.

With regard to price situation, Nageswaran said food inflation is likely to subside with the arrival of fresh stock in the market and government pre-emptive measures. Tomato prices are likely to decline with the arrival of fresh stocks by early September while enhanced imports of tur dal are expected to moderate pulse inflation, he said.

However, he said, August rain has been deficient and both the government and the Reserve Bank of India will be watching the food price developments.

During the first quarter, inflation stood at 4.6 per cent, lower than many developed and emerging economies. “Food inflation was dominated by specific commodities. So, I think there is no real cause for concern that inflation would spike out of control and both the government and the Reserve Bank are taking measures in their respective domain to ensure that there is adequate supply and availability and that any price increase is moderated,” he said.

With regard to fiscal deficit, Nageswaran said there is no threat to the 5.9 per cent fiscal deficit announced in the Budget despite the expected shortfall with respect to disinvestment.

To finance the fiscal deficit in 2023–24, the net market borrowings from dated securities are estimated at Rs 11.8 lakh crore. The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at Rs 15.4 lakh crore.

In Budget Estimates 2023–24, the Finance Minister had that the total receipts other than borrowings and the total expenditure are estimated at Rs 27.2 lakh crore and Rs 45 lakh crore, respectively. Moreover, the net tax receipts are estimated at Rs 23.3 lakh crore.

Continuing the path of fiscal consolidation, the government intends to bring the fiscal deficit below 4.5 per cent of GDP by 2025–26.

Talking about drivers of growth, Nageswaran said investment and consumer momentum will underpin solid growth prospects over the upcoming year.

The private sector capital formation, supported by the government’s capex push, is underway, which is a big plus for economic growth, employment and income gains for households, he said.

He further said that the new investment projects announced by the private sector have been highest in Q1 of FY2023–24 in 14 years.

The Union government’s single-minded focus on capital expenditure over the years has crowded in the private sector and it has rubbed off on state governments too.

Expansion of public digital platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes would boost manufacturing output, he said.

A slowdown in the global economy and trade may moderate export growth, but it may be overall better for India, he added.

With regard to consumption, he said, the rural demand for FMCGs has increased especially for high-value goods. The same trend is evident for small towns, contributing to growth, he added.

The CEA said that in spite of the global slowdown, the services sector exports have shown a remarkable performance and both manufacturing and services sectors are expanding and income growth is evident in the recovery in rural demand.

The residential real estate sector will underpin growth in the construction material sector, he added.

(With agency inputs)