New Delhi: V Anantha Nageswaran, India's Chief Economic Advisor (CEA), expressed optimism regarding the growth trajectory of the Indian economy during his address at the Assocham's Bharat @100 Summit on Thursday. He emphasized that a review of key economic indicators reveals a strong economic foundation.
"Assessing the various metrics of the Indian economy, it is evident that its health is quite solid. This includes factors such as external debt relative to GDP, the level of non-performing assets in the banking sector, and overall inflation rates. When examining the first seven months of this year compared to previous years, the headline inflation has remained stable," stated CEA Nageswaran.
He noted that while certain food items have significantly impacted inflation rates, their influence is limited to a small fraction of the total consumer price index.
Regarding fiscal balance and capital expenditure, Nageswaran highlighted improvements over the past seven years.
"The focus of fiscal spending has shifted in recent years towards increased capital expenditure, reducing the proportion of revenue expenditure," he explained, underscoring the ongoing resilience of the Indian economy.
Addressing concerns about a potential economic slowdown, the CEA acknowledged that erratic monsoon patterns and excessive rainfall have affected some economic activities in the second quarter.
India's GDP growth has fallen short of expectations, registering only a 5.4 percent increase in the July-September quarter of FY2024-25, which is considerably lower than the Reserve Bank of India's (RBI) anticipated growth of 7 percent.
This unexpected slowdown has prompted economists to revise their forecasts for the remainder of the year.
Chief Economic Advisor Nageswaran remarked, "In response to this figure, we should be cautious not to dismiss the overall growth narrative, as it remains fundamentally strong."
He pointed out that India's capital formation, encompassing investments from businesses, government, and public sector enterprises, rose from 27.3 percent of GDP at the end of the second decade to 30.8 percent now.
He further noted, "This represents an improvement of three and a half percentage points of GDP, while private consumption has remained stable and exports have also increased despite a challenging global landscape."
Nageswaran emphasized that when considering both services and manufacturing, India's total exports as a percentage of GDP surpass those of China.
"However, it is important not to overanalyze the second quarter's figures. This period experienced a rise in the global uncertainty index, and supply chain challenges intensified, which will likely persist. Recent announcements from China and anticipated trade restrictions from the United States on critical minerals and rare earths are factors that will continue to influence our economic environment," he explained, addressing the challenges that affected growth during the quarter.
