What Is In Store For The Indian Economy?

Until the 2014 Lok Sabha elections, when the Bharatiya Janata Party secured 282 seats and Narendra Modi ascended to power, India experienced 21 years of coalition governments. A decade later, the BJP holds 240 seats in the Lok Sabha, and India is once again governed by a coalition. Fitch has indicated that coalition politics and a weakened mandate for the NDA could hinder the passage of ambitious reform legislation. It raises the question: Do coalition governments impede the economic reform agenda?

- Shivanand Pandit

India has become the fastest growing major economy globally and is anticipated to be one of the top three economic powers within the next decade. India’s Gross Domestic Product (GDP) saw an impressive growth of 8.2per cent in 2023-24, according to the National Statistical Office (NSO), surpassing all economic forecasts. This figure even exceeded the NSO’s advance estimates, which had predicted a 7.6 per cent increase in GDP for the previous year. The growth rate for the January to March 2024 quarter was 5.9per cent, down from 8.4per cent in the third quarter. However, the fourth quarter recorded a 7.8per cent growth rate, slightly lower than the revised 8.6per cent rise in the preceding quarter. Private consumption, a crucial factor for the revival of industrial investments, remained weak but showed a slight improvement compared to the first half of the year.

In its latest monetary policy review in early June, the Reserve Bank of India projected a 7.2per cent GDP growth for 2024-25, up from its previous estimate of 7per cent. Retail inflation is expected to trend down to 4.5per cent, compared to last year’s average of 5.4per cent. However, initial indicators for the first two months of this year suggest a slow start. Industrial output growth slowed to a three-month low of 5per cent in April, according to data released on June 12.