CEA: India’s Surprising GDP Growth Driven by More Than One-Off Factors
India’s growth of over 8 percent in the last quarter was influenced by factors beyond one-time occurrences, indicating robust momentum in the economy, stated the government’s chief economic adviser.
In an interview on Thursday, Chief Economic Adviser V Anantha Nageswaran attributed the unexpected 8.4 percent increase in gross domestic product primarily to base effects associated with subsidies, which bolstered the net indirect tax category.
However, despite this, he noted that the growth of approximately 8 percent in the preceding two quarters, along with high-frequency indicators, indicates that the surge is not solely attributable to this temporary boost from indirect taxes. “There is inherent and sustained momentum within the economy,” he remarked.
According to Nageswaran, India’s “optimal” growth rate stands at 7 percent, while the “desirable” rate is 8 percent. He mentioned that attaining this accelerated growth would necessitate several economic reforms, with some being readily achievable, such as the enactment of labor and land policies. He emphasized that implementing these reforms could effectively propel the country towards a sustainable growth rate nearing 8 percent.
Nageswaran, a former banker who assumed his current position in 2022, expressed his opinion that the government’s official growth projection of 7.6 percent for the ongoing fiscal year, ending in March, is likely overly cautious. He suggested that this forecast, indicating a GDP expansion of 5.9 percent in the current quarter, is “unrealistic.” He further stated that growth “will surpass that figure.”
His remarks mirror those made by central bank Governor Shaktikanta Das, who indicated on Wednesday that growth for this fiscal year is likely to approach 8 percent.
He noted that the government’s emphasis on developing physical and digital infrastructure over the past decade has elevated the economy’s capacity to sustain higher growth rates for an extended duration.
Under Prime Minister Narendra Modi’s administration, infrastructure spending has doubled over the past three years, with approximately 11 trillion rupees ($133 billion) allocated to the sector in the upcoming fiscal year.
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