India's Economic Outlook: Industry Optimism Meets Conservative Projections

Confident India's FY25 GDP growth will surpass Economic Survey forecast: Industry

Industry bodies on Monday expressed confidence that India's GDP growth will surpass the 6.5 to 7 per cent forecast by the Economic Survey, and hoped that the upcoming Budget will roll out measures to help unlock the country's growth potential. Reacting to the Economic Survey 2023-24, tabled in Parliament, Chandrajit Banerjee, Director General, CII, stated that it is "pragmatic" in its approach and offers a futuristic vision to move India boldly towards achieving the developed economy status by 2047. "The survey is positive about the India growth story, and I am confident that India's GDP growth for FY25 will surpass the forecast given in the Survey and basis certain conditions, it has the potential to be at 8 per cent," CII President Sanjiv Puri said. Echoing similar sentiments, President of PHD Chamber of Commerce and Industry Sanjeev Agrawal said the Survey conservatively projects a real GDP growth of 6.5-7 per cent, with risks evenly balanced and market expectations on the higher side. "However, we believe that the growth will be above such conservative estimates as 8 per cent growth is becoming a new normal for India," said Agrawal. The GDP growth for FY25, which is imminently achievable, is driven by excellent macro financial management, and facilitative policy environment which includes a thrust on capex and inflation control. CII is confident that, going forward, the Indian economy has the potential to achieve 7 per cent plus growth backed by a consensus between the Centre, states and the private sector on the reform agenda, the industry body stated. The CII President expressed support to the reforms agenda proposed in the Survey for the medium term and hoped that forthcoming Budget would implement some of the measures which would help unlock the growth potential of the Indian economy. The Survey is spot-on in terms of the six key areas unveiled for Amrit Kaal namely boosting private investment, growth and expansion of MSMEs which is referred to as India's Mittelstand; agriculture as a growth engine, financing green transition, bridging the Education-Employment Gap and building state capacity and capability. This would fast track India's dream of realising the long-term vision for Viksit Bharat, stated Puri. According to him, the fact that greater attention should be paid to invigorating the agriculture sector to provide a boost to rural demand has been rightly recognised by the Survey. Similarly, the focus on improving the quality of life in the hinterland and emphasis on the social sector such as healthcare, would go a long way to empower the marginalised and ensure that every Indian becomes a stakeholder in New India. The Survey projects India's economic growth at 6.5-7 pc in FY2024-25 versus 8.2 pc in 2023-24. Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges, it said. PHD Chamber President Agrawal said Indian economy has consolidated its post-Covid recovery, ensuring economic and financial stability and is on the path to Viksit Bharat by 2047. "We are happy to note that the Indian Economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges," he shared. The Economic Survey indicates that India needs a tripartite compact between the government, the private sector and academia to enhance job creation and skill development, and complete the journey to Viksit Bharat by 2047, said Agrawal. Stating that government reforms for agriculture are highly appreciable, the PHDCCI President suggested that to boost the sector further, a major thrust is required towards traditional farming practices to generate higher value addition, boost farmers' incomes, create food processing and export opportunities, and make the farm sector more productive for urban youth. To unleash the strength of small enterprises, it is essential to formalize these industries to enable increased access to financial resources through formal channels and bolster their growth, said Agrawal. We appreciate the six-pronged growth strategy focusing on private capital formation, public-private partnerships for green transition, MSME support, sustainable agriculture, targeted education and skill policies, and enhancing state capacity for sustained progress, he added. It is highly appreciable that our economy is on a strong footing and is growing at more than 8 per cent (average) for the period from 2021-22 to 2023-24, said Agrawal. "We see a very mature take on the outlook for the Indian economy presented today as part of the Economic Survey. While a projected growth rate of 6.5-7 per cent for the fiscal 2024-25 may appear a bit conservative, we feel that for a country of the size of India and which has been growing at a fast pace, this growth is encouraging," Ficci President Anish Shah said. Having said that, let me also add that with many path breaking reforms such as GST and IBC having now matured, it is time that we look at the next leap on the reforms trajectory that would prepare India for achieving even higher growth, he added. Assocham Secretary General Deepak Sood described the Survey as a bold document. "The way Survey has emphasised the need for creating 78.5 lakh jobs annually till 2030 signals the government's resolve to leverage the fourth global industrial revolution, taking advantage of new-age technologies like AI. The industry would join these efforts to steer different technological choices with eyes on creating quality jobs, as pressed upon by the Survey," Sood stated.

Survey projects conservative growth forecast of 6.5-7% for FY25

In the backdrop of 8.2 per cent GDP growth in the previous fiscal, the Economic Survey for 2023-24 on Monday came out with a conservative forecast of the current discal economic growth at 6.5-7 per cent. The Survey had a radical suggestion about rethinking the inflation targeting framework to evolve a system minus food and rethinking the policy towards China in terms of easing restrictions on FDI norms for India's powerful neighbour. The survey's growth predictions are lower than the Reserve Bank of India's 7.2 per cent but align with the 7 per cent forecast by other agencies like the International Monetary Fund (IMF) and the Asian Development Bank (ADB). "The Economic Survey highlights the prevailing strengths of our economy and also showcases the outcomes of the various reforms our Government has brought. It also identifies areas for further growth and progress as we move towards building a Viksit Bharat," Prime Minister Narendra Modi said in a social media post The survey was tabled by Finance Minister Nirmala Sitharman in both the Houses of the Parliament. It has been authored by a team led by Chief Economic Advisor V Anantha Nageswaran. Addressing a press conference, the CEA said the growth projection may be lower compared to estimates by other agencies, yet the Survey accounts for risk factors including progress of monsoon, rising financial market risks in the developed world with spillover effects on India and the the geopolitical environment. "We want to be prudent in projecting growth rate, that is why we have projected the country's economic growth at 6.5 to 7 per cent in FY24," he said. In the preface to the Survey report, the CEA said the Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. He said the Indian economy has consolidated its post-Covid recovery with policymakers - fiscal and monetary - ensuring economic and financial stability. "Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate," he wrote. Inflation The survey noted that the headline inflation rate is largely under control, although the inflation rate of some specific food items is elevated. It said that food constitutes a very high portion of the consumer price index in developing countries and when central banks in developing countries target headline inflation, they effectively target food prices. "So, when food prices rise, inflation targets come under threat. Therefore, the central bank appeals to the government to bring down the increase in the prices of food products. That prevents farmers from benefiting from the rise in terms of trade in their favour," it said. Further, it suggested "India's inflation targeting framework should consider targeting inflation, excluding food. Higher food prices are, more often, not demand-induced but supply-induced." Policy on China Nageswaran highlighted that two forces can deepen trade deficit with China. One is trade diversion by the West away from China, because of which India's industries will be placed as intermediate suppliers between China and the West (similar to Mexico and Vietnam). Second is for enhancing manufacturing capacity within the country which means reliance on Chinese manufacturing inputs will rise. Considering these, the survey said: "Among these choices, focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past." Employment Nageswaran mentioned that India needs to generate an average of 78.5 lakh jobs annually until 2030 in the non-farm sector. Various reports suggest that 63 per centof Indian companies have talent shortage in IT, engineering services, and sales while at the same time 51.3 per cent of young people are employable. He also called for deregulations as current State level labour regulations have unintended adverse consequences for the workforce, and women especially. 10 most populous States collectively impose 139 prohibitions on women from participating in factory processes, while 11 States bar women's employment at night. On the issue of impact of AI on employment, he said that it could slow BPO sector growth, affecting customer service in short term, but in the long run, broader AI adoption could lead to significant improvements in healthcare and education, enhancing human capital. SHARE Copy linkEmailFacebookTwitterTelegramLinkedInWhatsAppRedditPublished on July 22, 2024

Eco Survey pegs India GDP growth at 6.5-7 pc, backs Chinese investment

It sounded a bell of caution on the soaring stock markets, saying retail investor participation has increased significantly and there are chances of speculations due to overconfidence and expectations of greater returns. The Survey, tabled by Finance Minister Nirmala Sitharaman in Parliament, projected a 6.5 per cent to 7 per cent GDP growth rate in the current fiscal year that started in April. This is lower than 8.2 per cent growth seen in the previous 2023-24 (April 2023 to March 2024) fiscal and below than RBI's 7.2 per cent estimate for current fiscal. "The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges," Chief Economic Adviser V Anantha Nageswaran wrote in the preface to the annual report card on the state of the economy. He, however, hastened to add that fears of cheaper imports from countries with excess capacity could limit the formation of private capital. Acknowledging that this year's forecast was on the conservative side, and lower than market expectations, the Survey cited slower investment growth by the private sector as well as uncertain weather patterns as some of the reasons for caution. For the medium-term, it saw a potential of 7 per cent-plus growth rate on a sustained basis if structural reforms are implemented. The report, that came just a day before Sitharaman presents the Budget for 2024-25 that is likely to layout the economic priorities of the Modi 3.0 government and the vision for a developed nation by 2047, identified boosting private investment, strengthening small businesses and agriculture, raising financial resources for climate change adaptation, easing red tap for small businesses, and tacking income inequality as focus areas. Priorities should also include bridging the gap between education and employment, it said, calling for expediting implementation of labour reforms to create a more conducive environment for job creation. "The Indian economy needs to generate an average of nearly 7.85 million jobs annually until 2030 in the non-farm sector to cater to the rising workforce," the report said. In the preface to the Survey, the CEA said job creation happens mainly in the private sector. "Second, many (not all) of the issues that influence economic growth, job creation and productivity and the actions to be taken therein are in the domain of state governments." "So, in other words, India needs a tripartite compact, more than ever before, to deliver on the higher and rising aspirations of Indians and complete the journey to Viksit Bharat by 2047," he said. He termed Prime Minister Narendra Modi coming to power for a third time as an "unprecedented third popular mandate" that "signals political and policy continuity" and in the same breath stated that "letting go is part of good governance". "The Indian state can free up its capacity and enhance its capability to focus on areas where it has to by letting go of its grip in areas where it does not have to," he said. "The Licensing, Inspection and Compliance requirements that all levels of the government continue to impose on businesses is an onerous burden. Relative to history, the burden has lightened. Relative to where it ought to be, it is still a lot heavier." The Survey called for boosting direct investment from China while reducing imports from that country. Amid strained ties since 2020 after border skirmishes, the report said to boost exports, India can either integrate into China's supply chain or promote foreign direct investment from China. "Among these choices, focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past," it said, adding choosing the FDI strategy "appears more advantageous than relying on trade" as it can arrest the growing trade deficit India has with China. Following the 2020 clashes in the Galwan Valley, India banned over 200 Chinese mobile apps such as TikTok, and rejected a major investment proposal from EV maker BYD. Visas for Chinese nationals also slowed. On inflation, the Survey said the short-term inflation outlook is benign. It favoured Reserve Bank of India's monetary policy framework, considering to tame inflation excluding food and using it to set interest rates. Currently, the central bank is mandated to keep consumer price index-based inflation at 4 per cent with a tolerance band of 2 percentage points on either side. CPI inflation in June stood at 5.08 per cent but demand-driven core inflation, which leaves out food and fuel prices, was around 3 per cent. And to keep CPI inflation bring down below 4 per cent has led to RBI holding interest rates for eight straight bimonthly meetings. The Survey said hardships caused by higher food prices for poor and low-income consumers can be handled through coupons or direct benefit transfer (DBT). It also flagged a rise in mental health issues among Indians, saying it drags down productivity and needs to be paid attention to. It also said that the advent of Artificial Intelligence (AI) casts a "huge pall of uncertainty" with regard to impact on workers across all skill levels. Nageswaran in the preface to the Survey called for the need for policy re-orientation of farm policies despite existing subsidies and support measures. PTI TEAM ANZ HVA

Economic Survey a morale-booster for India's growth story: industry body ASSOCHAM

As per the Economic Survey 2023-24 tabled by Finance Minister Nirmala Sitharaman, the Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers - fiscal and monetary - ensuring economic and financial stability, the 476-page Economic Survey document said in its initial remarks. It asserted that the economy continues to expand. India's service sector continues to significantly contribute to India's growth, accounting for about 55 per cent of the total size of the economy in financial year (FY) 24, the Economic survey revealed. As per the Provisional Estimates, the services sector is estimated to have grown by 7.6 per cent in FY24. "Noteworthy is the fact that Survey's promising GDP projections for the current financial year come in the backdrop of 8.2 per cent economic growth in 2023-24. Growth is well spread across different sectors like manufacturing, real estate, and construction, as pointed out by the important document presented in Parliament, " ASSOCHAM's Secretary-General Deepak Sood said. According to official data of the Indian government, the country's GDP grew at an impressive 8.2 per cent during the financial year 2023-24. India's economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22 respectively. "When I look at the Economic Survey, it is clearly a testament to the adaptability and forward-thinking approach that the Government is now looking at... They are highly consolidated numbers," Sood told ANI. The ASSOCHAM noted that while a robust industrial growth of 9.5 per cent is to be applauded, manufacturing is supported by both domestic and global investors and demand can lead to a consistent increase of its share in the country's GDP. The chamber agreed with the assessment that physical infrastructure, logistics, and compliance bottlenecks have significantly improved over the last few years, thus creating the right environment for increased industrial activities. The Indian economy has recovered and expanded in an orderly fashion post-pandemic and the real Gross Domestic Product (GDP) in 2023-24 was 20 per cent higher than its level in pre-pandemic 2019-20. Sood shared optimism about the Indian economy, as affirmed by the Economic Survey. Describing it as a bold document, he said, "The way Survey has emphasised the need for creating 78.5 lakh jobs annually till 2030, signals the government's resolve to leverage the fourth global industrial revolution, taking advantage of new age technologies like AI. The industry would join these efforts to steer different technological choices with eyes on creating quality jobs, as pressed upon by the Survey", the ASSOCHAM Secretary General said. The industry body also noted that the Survey has aptly emphasised the importance of deregulation and the catalyst role of the private sector in boosting investment. Specific stress on expanding the Indian manufacturing sector for generation of employment for "semi -skilled" workforce needs to be complimented. (ANI)

Conservative growth estimate due to global uncertainties, experts on Economic Survey

India's Economic Survey has projected a conservative growth of 6.5-7 per cent for the current fiscal year due to global uncertainties and domestic challenges. This is lower than the 8.2% growth rate estimated in 2023-24 and a bit lower than the Reserve Bank's forecast of 7.2% for the current financial year. The survey has proposed a compact between central and state governments, corporate sector, and academia to overcome the unprecedented economic scenario. The Economic Survey has projected a conservative growth of 6.5-7 per cent for the current fiscal year because of global uncertainties and various domestic challenges, experts said on Monday. The projection is lower than 8.2 per cent growth rate estimated in 2023-24 and tad lower than Reserve Bank's forecast of 7.2 per cent for the current financial year. Finance Minister Nirmala Sitharaman, who will present the Union Budget on Tuesday, tabled Economic Survey 2023-24 in Parliament on the first day of Monsoon session. The survey has been authored by a team led by Chief Economic Advisor (CEA) V Anantha Nageswaran. Commenting on the document, Ranen Banerjee, Partner and Leader Economic Advisory, PwC India said the CEA has sounded a cautious note by projecting a growth rate of 6.5-7 per cent for 2024-25, highlighting the global uncertainties and domestic challenges. "The Economic Survey has proposed a compact between the central and state governments, corporate sector and academia to overcome the unprecedented economic scenario. There is a nudge to governments to let go of various regulations, citing the Ishopanishad," he said. Banerjee further said there is also a nudge to the private sector to invest in IP, machinery and equipment. Aditi Nayar, chief economist at ICRA opined that the survey implicitly stresses that in the medium term, growth needs to be supported by the private corporate sector as well as state governments. "Managing inflation, on the other hand, is not just the prerogative of RBI and its monetary policy committee, and would require active intervention by the Centre, especially in the arena of food price management," she said, and added the realisation of both these paradigms is crucial to ensure an optimal growth-inflation mix over the medium term. Rumki Majumdar, economist, Deloitte India said while the government has shouldered a larger responsibility to invest in infrastructure, private investment in IP and machinery too has been strong, growing cumulatively at 35 per cent in four years. "But investment in dwellings and structures has been even stronger pointing to a higher inclination among households to save in physical assets," Majumdar said. She further said the unemployment rate has decreased through the years, accompanied by increased participation among youth and females. Keeping up with the momentum will be an important focus for the government as the accelerated growth of AI, specifically GenAI, is poised to revolutionize the nature of work and skills. "Amid these disruptions shaping the future of work, the government will have to prioritise skill initiatives to prepare the workforce of the future," Majumdar added. Vivek Jalan, Partner, Tax Connect Advisory Services LLP, said the survey has set the tone for the Budget which the finance minister will present in the Lok Sabha on Tuesday. He said India seems set for becoming the third-largest global economy very soon as per the vision of the government. "However, this vision cannot be achieved unless MSMEs are propelled forward, as they remain the chief employment generator and GDP driver for India. For MSMEs, the economic Survey does accept and recognise the need for maximum relief from compliance burdens," he said. The Economic Survey is a key pre-budget document which provides a snap shot of the economy as well as suggestions for future growth. On Budget, Chairman of Dhanuka group R G Agarwal said for a stronger agricultural sector and national food security, the government should implement a PLI scheme for crop protection and reduce GST on pesticides. "This will empower farmers and make these crucial tools more affordable. To ensure sustainability and responsible use, we call for investment in advanced testing labs and a farmer-friendly regulatory framework that promotes traceability of crop protection products," he said. Neeraj Akhoury, MD Shree Cement said the cement industry is optimistic about significant allocations in the Budget to housing and infrastructure, which account for over 80 per cent of the demand for cement. "We expect further spending on highways, roads, bridges, and urban development, alongside more funds for projects. The announcement of a cement corridor in the Interim Budget has been encouraging, and we hope for more steps to enhance transport integration, making the movement of cement and related materials more efficient," Akhoury said. The projection of India's growth in Economic Survey is a tad lower than the Reserve Bank's growth estimates of 7.2 per cent. However, major global agencies, including IMF and ADB, have projected the growth at 7 per cent.