Chief Economic Advisor V Anantha Nageswaran on Thursday expressed hope that the economy will maintain the trend growth rate of 6.5 per cent and above for the rest of the years in the current decade.
The economy will close the current fiscal logging in a growth of 6.5-7 per cent, he said, citing the projections of private sector analysts, Reserve Bank of India (RBI) and international agencies like OECD and the IMF. “This appears to be reasonable at this point in time although we will get the data on the fiscal second quarter in a few days, which will give more clarity on these numbers. By and large, the projections for FY24 coming from international agencies is converging around 6-6.2 per cent,” he said at the SBI Banking and Economic summit here.
For the current financial year ending March 2023, Citigroup has projected an economic growth of 6.7 per cent, S&P Ratings has estimated 7.3 per cent expansion and RBI has pegged the growth at 7 per cent. Going ahead, Nageswaran expressed hope that “the economy will clip at 6.5 per cent each year through the reminder years of the current decade and not less as some analysts suggest… because the internal drivers of demand are looking resilient now.
“Coupled with this, the re-invigorated capex cycle that along with the stable financial system and structural reforms of the past many years are paving the way for medium-term growth to continue at a higher pace”. In support of RBI Governor Shaktikanta Das’ recent defence of delayed tightening, Nageswaran said the amount of tightening that would have been required in FY22 would have been stronger but that would have caused unnecessary volatility in macroeconomic variables such as the outlook on inflation.
“And the fact that the central bank and government took gradual, cautious and targeted interventions during the pandemic have paved for consistency in the macro variables,” he added. Retail inflation has remained above 6 per cent, the upper tolerance level of the Monetary Policy Committee for nine consecutive months or three straight quarters. Citing the high credit growth which peaked at 18 per cent in October, Nageswaran said the prospects for the capex cycle return is imminent in the medium term.
He based his optimism on a slew of factors like rising capital formation by way of better and healthier balance-sheets of the banking sector, highly deleveraged corporate sector and the capacity utilisation levels reaching the levels which in the past had triggered capex. According to him, the private sector capex in the first half of the current fiscal has already has crossed the Rs 3 lakh crore-mark and if the pace continues, “we should be looking at Rs 6 lakh crore for this year”.