Growing Pains

AFTER GROWING 7.8 PER CENT IN Q1FY24, INDIA'S ECONOMIC GROWTH MAY SLOW DESPITE A FOCUS ON CAPEX. AN ERRATIC MONSOON MAY LOWER DOMESTIC DEMAND AND FAN FOOD INFLATIONARY PRESSURES, WHILE THE GLOBAL SLUMP COULD HURT EXPORTS

- SURABHI

THIS IS INDIA'S decade. Bullish about T the country's growth potential, a flurry of recent reports have said so; some have even called it India's century. While the India growth story may be strong in the long term, the near-term picture is not so sunny. There are rising concerns about how well India can ride the brewing global storm as well as emerging domestic challenges like a weak monsoon that could further fuel inflationary pressures and hit consumption demand. The upcoming general elections in 2024 could also impact the capital expenditure (capex) plans of the government that are currently on in full swing.

Let's talk numbers. The economy expanded at a four-quarter high of 7.8 per cent in the April-June 2023 quarter, boosted by the services sector and strong domestic demand. Gross value added (GVA) in the services sector expanded by 10 per cent in Q1FY24, aided by double-digit growth of 12.2 per cent in financial, real estate and professional services, and 9.2 per cent expansion in trade, hotels, transport and communications. Industry GVA remained flat at 4.7 per cent while farm sector growth moderated to 3.5 per cent in Q1FY24.

Chief Economic Adviser V. Anantha Nageswaran is confident that the economy will grow 6.5 per cent in FY24 and expects that the 7.2 per cent GDP growth estimate for FY23 will be revised upwards. Going forward, real GDP growth is estimated at 6.5 per cent for the next 7-10 years, he says. "The scope for upside to this number is probably higher than the scope for downside," he says, adding that further reforms such as ensuring energy security, power sector reforms or addressing the skilling and education challenges have the potential to boost growth further. (For his full interview, turn to page 54)