India's Chief Economic Advisor V Anantha Nageswaran said that GDP growth for fiscal 2024 could be possibly underestimated, in the light of statistics for the first half of the financial year.
The government would maintain its growth forecast for the full year, pending an analysis on the upside from Thursday's Q2 GDP data, he said.
India's GDP surpassed expectations in the second quarter to grow 7.6%, driven by manufacturing and construction. GDP was estimated to grow 6.8% in Q2, according to 41 economists polled by Bloomberg. Meanwhile, GVA growth was pegged at 6.8% against the 7.4% that it recorded.
"These numbers impart a certain upside to the 6.5% estimate for real GDP growth in FY24, but we will have to work on the numbers to see what kind of upside the current numbers impart for the full-year estimates. Until then, we will keep the estimate at 6.5%, except to signal that we are now more comfortable with this number than we were before," he told media.
According to him, an underestimation of the growth numbers is possible, given that the tax buoyancy is close to 2, which he termed as "historically unprecedented". "...It is quite possible that we are not measuring the economy's underlying momentum, economic activity and dynamism as we should be," he said.
Building on expectations for the third quarter, he said that the momentum of economic growth has continued in the quarter as well owing to the festive season.
Key Highlights Of CEA's Outlook
Investment and consumer momentum will underpin solid growth prospects over the upcoming year, he said.
The private sector to attain stronger investment growth following the strengthening of corporate and bank balance sheets, supported by the government's capex push, according to him.
Expansion of public digital platforms and path-breaking measures such as PM Gati Shakti, the National Logistics Policy, and the Production-Linked Incentive schemes to boost manufacturing output.
Uncertainty prevails over merchandise trade, with the WTO slashing its projection for world trade growth in 2023 by half to 0.8% from its earlier estimate of 1.7% in April.
Considering the ongoing geopolitical conditions, Brent crude oil price requires vigilance, he said.
Prolonged geopolitical uncertainty and tightened financial conditions also pose a challenge to the growth outlook, Nageswaran said.
The GDP growth numbers for Q2 display the resilience and strength of the Indian economy in the midst of such testing times globally. We are committed to ensuring fast paced growth to create more opportunities, rapid eradication of poverty and improving ‘Ease Of Living' for our…
November 30, 2023AdvertisementManufacturing And Construction Lead Growth
Manufacturing, which expanded 13.9% as compared with a 4.7% rise in Q1; and construction, which grew 13.3% as against 7.9% in Q1, were sectors which saw the highest growth. Electricity and other public utilities also expanded 10.1% as compared with 2.9%, displaying postive momentum.
In terms of the sustainability of growth in these sectors in the second half of the year, Nageswaran said that the momentum will sustain itself, particularly for segments like construction where he noted the momentum has just begun.
Nageswaran said that indicators such as the rise in import of capital goods and increased production of capital infrastructure goods in the IIP index indicate clear uptrends in private capital expenditure. He also referenced the RBI's monthly bulletin for November, which noted fundraising by the private sector was 60% higher in first half of FY24 than the second half of FY23.
The combined order book of capital goods and engineering firms was Rs 8 lakh crore in the second quarter of fiscal 2024, he said before adding that private sector capital formation is "not an aircraft waiting for takeoff but has already started to move and is flying."
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