India's economy will grow higher than 7%, even closer to 7.5%, in the current fiscal on the back of expectations of above normal monsoon and absence of any known global risks so far, economic think tank National Council of Applied Economic Research said in its monthly review. It said high-frequency indicators reveal that the domestic economy has remained resilient and growth projections for 2024-25 have also been revised upward by all the agencies.
The range of projections for India for the current fiscal year is between 7.2% and 6.2%, NCAER said.
NCAER director general Poonam Gupta said, "GDP growth during 2024-25 may turn out to be higher than 7% and even closer to 7.5%." This outlook is underpinned by the buoyancy in economic activity witnessed in the first quarter, a keen policy focus on investment, growth, and macroeconomic stability and the expectations of normal monsoon, Gupta added.
With inflation seemingly having peaked, monetary policy is unlikely to be tightened any further, she said, "Finally, global environment seems benign as well in the absence of any known global risks so far." Gupta said that taming food prices remains a challenge.
"A broader policy framework may be needed to address it, including building climate-resilient food supply as also a gentle shift toward packaged and preserved food supply to bridge the periodical supply and demand gap that has become routine," she added.
Earlier this month, the Reserve Bank of India pegged the GDP growth rate for FY25 at 7.2%.
Retail inflation eased to a 12-month low of 4.7% in May, though food inflation remained elevated.
The RBI, which has been mandated to ensure inflation remains at 4% (with margin of 2% on either side), mainly factors in consumer price index based inflation) while arriving at its monetary policy.
High-frequency indicators reveal that the domestic economy continues to remain resilient, NCAER said.
The Purchasing Managers' Index for both manufacturing and services kept the expansionary momentum despite slowing down a bit in May.
Growth in Index of Industrial Production for Core industries accelerated in April 2024; Goods and Services Tax collections remained buoyant year-over-year; bank credit growth remained above 20% despite some deceleration in personal credit growth; and expectations of 'above normal' monsoon despite deficient rainfall in June held out strongly for the farm sector, it added.
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