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India will achieve GDP growth of 6.5 percent in FY24 and can easily sustain

Rajiv Kumar, a former vice chairman of NITI Aayog, predicted on Monday that the Indian economy will expand at a rate of about 6.5% in the current fiscal year thanks to a number of macroeconomic factors that are in its favor.

He claimed that the Modi administration’s reform initiatives during the previous nine years have benefited India’s economy. He further stated that the Indian economy must expand by more than 8% in order to meet the need for new jobs from the young population.

“My growth projection is 6.5 percent (for India’s GDP growth in FY 2023–24).”And I believe we will be able to easily continue this growth over the coming years,” he said in an interview with PTI.

India’s GDP growth in 2022–2023 was 7.2% rather than 2021–2022’s 9.1%.

The Reserve Bank of India predicts that India’s GDP will increase by 6.5 percent during the current fiscal year.

In addition, Kumar stated that India’s macroeconomic situation was improved by the changes that had been put in place over the previous nine years. Thus, both the domestic and the external macroeconomic balances are in good health.

He claimed that India’s current account deficit could be controlled, its foreign exchange reserves could cover imports for around 11 months, and foreign direct investment flows were still occurring.

On the domestic front, according to Kumar, the inflation is starting to decline to the goal ranges and the government’s tax collections have increased by a respectable 16% since last year.

“As a result, this will resolve the financial situation and bring about fiscal consolidation. The rating agencies have raised their ratings as a result of this development, and JP Morgan has included India to its list of countries with international bond indexes,” he said.

The main problem, according to Kumar, is that private business investment is not yet responding as “we would expect, but that also is beginning to improve, as demonstrated by the increase in bank credit growth over the last six months”.

He stated, “This reflects our age-old situation, which is that India’s export performance is strongly correlated with the global trade performance.” He expressed alarm about the approximately 11% fall in India’s exports between April and August compared to the same time last year.

Given the sluggish demand in Europe, the US, and other developed economies, Kumar noted that India’s export performance has worsened along with the global economy.

“This needs to be changed. Whatever it takes, we must ensure that our exports have a larger market share globally, he said.

The Ministry of Statistics and Programme Implementation (MoSPI), according to Kumar, must take a strong stance and provide sufficient justifications for why the wholesale price index (WPI) deflator rather than the consumer price index (CPI) is being used as the GDP deflator in response to claims made by some US-based economists that India is overstating economic growth.

“And that needs to be firmly established once and for all,” Kumar emphasized.

According to the Income or Production Approach, India’s real GDP grew by 7.8% in Q1 FY24 over the same period last year.

Arvind Subramanian, a former senior economic advisor, has claimed in an article that India’s GDP is solely calculated from the revenue side and not the expenditure side. This has a propensity to overstate GDP growth.

When the same statistical authority reported the most severe contraction in the first quarter of 2020, the naysayers had called it credible because it fit their narrative, Chief Economic Advisor V Anantha Nageswaran claimed last month. He rejected criticism of “statistical discrepancy” in the first quarter GDP data.

Nageshwaran’s post was produced in response to discussions about India’s economic performance and worries raised by Princeton University professor and economist Ashoka Mody about the GDP growth rate of the nation during the first quarter of the fiscal year 2023–24.