India F24 GDP growth likely hit 8%, to grow 7% in FY25: CEA Nageswaran

India's economy likely expanded at 8% through fiscal year 2024 (FY24), and growth in the current year is projected at 7%, V Anantha Nageswaran, chief economic adviser to the government, said on Wednesday.

Speaking at an event organized by think tank National Council of Applied Economic Research (NCAER), Nageswaran said that for the Indian economy to register 7% or higher growth for the fourth consecutive year in FY25, “a lot would depend on the monsoons.” 

"Right now, the expectations are that we will have an above-normal monsoon. But, spatial and temporal distribution (of rainfall) will matter," he said.

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As things stand, India remains the world’s fastest-growing major economy.

The Indian economy surged ahead in the December quarter, clocking 8.4% growth and belying fears of a slowdown, driven by solid performances in manufacturing, electricity, and construction sectors. As a result, the National Statistical Office revised its GDP growth estimate for FY24 from 7.3% to 7.6%.

The Reserve Bank of India (RBI) estimates economic growth at 7% for FY24, while the International Monetary Fund (IMF) projects it at 6.8%. 

Several agencies have recently revised their estimates for India’s FY24 GDP growth. For instance, ratings agency Moody's increased its estimate from 6.6% to 8%, citing strong government expenditure and domestic consumption. Last month, Fitch Ratings also raised India’s growth forecast for FY25 from 6.5% to 7%, highlighting investment as a significant growth driver.

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Nageswaran said that he doesn't foresee any significant upside risk to inflation at the moment and expects retail inflation to remain within the midpoint of the RBI's target range of 2-6% in FY25. 

"There can always be scenarios on the geopolitical front that can cause inflation to be more than what we expect. But at this point, our baseline scenario is that inflation gradually converges towards the midpoint of the target range in FY25," he added.

India's consumer price index (CPI)-based retail inflation fell to 4.85% in March, dipping below 5% for the first time since November 2023, mainly due to a decline in food and fuel prices and a continued easing in core inflation. 

Though CPI inflation remains above the central bank’s target of 4%, it has stayed within its tolerance range of 2-6% for the seventh consecutive month in March.

Nageswaran highlighted the need for growth in the small and medium enterprises (SMEs) to increase the share of manufacturing in the country's overall GDP. 

"Building blocks such as supply-side infrastructure, physical connectivity, digital connectivity, and financial inclusion are good work in progress," he said. “But apart from these, ultimately, the compliance burdens and inspection burdens that businesses face at the subnational government level need to be addressed to grow the manufacturing share of GDP.”

At the event, IMF economist Mehdi Benatiya Andaloussi said that global growth, estimated at 3.2% in calendar year 2023, is expected to remain at same levels in 2024 and 2025. 

"Risks to the global outlook are now broadly balanced," he said. “The near-term priority is to ensure that inflation touches down smoothly and fiscal buffers are rebuilt.”

Poonam Gupta, director general, NCAER, and a member of the Economic Advisory Council to the Prime Minister (EAC-PM), noted that the increased resilience of the Indian economy has made it less vulnerable to internal and external shocks that previously had significant adverse impacts. 

These shocks include political or policy uncertainty, sharp increases in oil prices, deficient or erratic rainfall, global risk aversion leading to abrupt capital flow withdrawals, increased external financing costs, and macroeconomic instability originating in the financial sector.

"The economy is shifting towards services, which is less oil intensive. The energy efficiency of the overall economy has improved," she said. “Meanwhile, the agriculture growth rate has accelerated and has become more stable over time.”

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