Source: Times of India(TOI)

In a positive economic outlook, V. Anantha Nageswaran, Chief Economic Advisor (CEA) to the Government of India, forecasted that the country’s economy is expected to grow between 6.5% and 7% in the fiscal year 2024-25. His projection underscores the resilience of the Indian economy, even amidst global uncertainties like inflation, geopolitical tensions, and supply chain disruptions.

Steady Economic Performance in 2023-24

Nageswaran’s forecast comes after India’s steady growth in 2023-24, where the GDP grew by approximately 6.5%. Despite challenges such as rising inflation and the aftermath of the pandemic, India emerged as one of the fastest-growing economies in the world, primarily driven by strong domestic demand, government reforms, and robust services and manufacturing sectors.

Drivers of Growth

Key factors propelling India’s growth include the ongoing recovery in private consumption, the continued expansion of infrastructure, and strong investments from both domestic and international players. Sectors such as IT, manufacturing, and agriculture have been major contributors, and the government’s focus on increasing ease of business, along with policy reforms, has supported this momentum.

1. Private Consumption
Private consumption, which forms a significant part of India’s GDP, is expected to increase as the middle class continues to grow. Consumer spending in both urban and rural markets remains buoyant, further supported by increased employment and rising wages in several sectors. This recovery is helping to balance out global economic slowdown pressures.

2. Investments in Infrastructure
The Indian government’s push toward improving infrastructure through initiatives such as the National Infrastructure Pipeline (NIP) and Gati Shakti is expected to drive growth. These infrastructure projects are not only creating jobs but are also helping to connect remote areas, enhance logistics, and boost overall economic productivity.

3. Foreign Investments
With the government’s focus on improving the ease of doing business and attracting foreign investments, there has been a notable rise in FDI inflows in critical sectors like technology, telecom, and renewable energy. India’s attractiveness as a manufacturing hub has increased, especially under the Production Linked Incentive (PLI) scheme, which has drawn interest from multinational companies.

Global Risks and Inflation Challenges

Despite this optimistic projection, Nageswaran highlighted several global risks that could impact the growth trajectory. Inflation, which remains a concern globally, particularly with rising oil prices, has the potential to dampen consumer spending and investment. Furthermore, ongoing geopolitical tensions, such as the Russia-Ukraine war, have affected global supply chains, which could create uncertainties in the coming year.

To combat inflation, the Reserve Bank of India (RBI) has been following a cautious monetary policy, raising interest rates to keep price levels in check. However, Nageswaran remains confident that India’s inflation rates will stabilize in the near future, allowing for sustainable economic growth without severely impacting consumer sentiment.

The Role of Digital Economy and Innovation

The digital economy is also seen as a critical driver of India’s growth. Digital transformation initiatives, including the expansion of fintech, e-commerce, and digital infrastructure, are expected to increase economic participation and efficiency. Innovations in sectors like artificial intelligence, data analytics, and biotechnology are poised to transform industries and offer India a competitive advantage on the global stage.

Nageswaran stressed the importance of nurturing innovation, encouraging entrepreneurship, and building a tech-driven economy that can sustain long-term growth.

Export Growth and Trade Partnerships

India’s export growth has been another critical factor. The country has actively pursued new trade partnerships and agreements to boost exports across sectors such as textiles, electronics, and pharmaceuticals. Nageswaran emphasized that diversifying exports and reducing dependence on a few key markets would help mitigate external shocks and ensure steady growth.

The government’s trade policies, focusing on partnerships with countries like the UK, Australia, and several ASEAN nations, aim to increase market access and boost competitiveness globally.

Inclusive Growth and Sustainable Development

In addition to economic growth, Nageswaran reiterated the government’s commitment to sustainable development and inclusivity. The CEA emphasized that India’s growth must be equitable, ensuring that the benefits reach all sections of society, especially the marginalized. Sustainable development practices, particularly in renewable energy and green technologies, will be key areas for future investments.

The government has laid out ambitious plans to achieve a net-zero carbon emission target by 2070, which will involve shifting to greener technologies, promoting electric vehicles, and improving energy efficiency in industries.

V. Anantha Nageswaran’s forecast of 6.5-7% growth for 2024-25 reflects a strong economic foundation, driven by key sectors like infrastructure, digital innovation, and exports. While global uncertainties remain, India’s policy reforms and economic resilience position it as one of the leading economies in the world. The government’s focus on sustainability, inclusive growth, and digital transformation is expected to drive continued growth and elevate India’s status on the global economic stage.