V Anantha Nageswaran, the Chief Economic Adviser, expressed optimism on Wednesday regarding the potential for India's GDP growth to reach 8 percent in the fiscal year 2023-24. He attributed this optimism to the robust growth witnessed in the three quarters leading up to March 2024.
During the third quarter ending December 2023, India's gross domestic product (GDP) expanded by 8.4 percent. Preceding this, the GDP growth rates were 7.6 percent in the second quarter and 7.8 percent in the first quarter of the fiscal year.
Addressing an event organized by NCAER, Nageswaran highlighted that while the International Monetary Fund (IMF) had projected a growth rate of 7.8 percent for FY24, the trajectory of growth in the initial three quarters indicated a strong possibility of touching 8 percent.
This forecast surpasses the Reserve Bank of India's estimate of 7.5 percent growth for the Indian economy in 2023-24.
Looking ahead to the current fiscal year, Nageswaran noted that the IMF's estimate stands at 6.8 percent, while the Reserve Bank of India anticipates a 7 percent GDP growth for FY25. He emphasized that if this materializes, it would mark the fourth consecutive year of 7 percent or higher growth since the onset of COVID-19 in FY22.
However, Nageswaran cautioned that the outcome would be contingent on the performance of the monsoon, despite expectations of an above-normal rainfall. He stressed the importance of spatial and temporal distribution in this regard.
Regarding growth beyond FY25, he suggested the possibility of India achieving a growth rate between 6.5-7 percent. He attributed this optimism to the strengthened balance sheets in both the financial and non-financial sectors, as well as investments in physical and digital infrastructure.
Nageswaran also noted a shift in household sector savings flows in 2022-23, with a significant portion being directed towards real sectors.
When asked about the RBI's recent circular on under-construction infrastructure project financing, Nageswaran refrained from commenting, citing it as draft guidelines. The circular proposed higher provisions for under-construction projects, suggesting lenders set aside 5 percent of the loan amount, which would be reduced to 2.5 percent once the project becomes operational. Currently, lenders are required to provision 0.4 percent for project loans not overdue or stressed.
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