India’s 6.3-6.8% GDP growth estimate for FY26 not a slowdown, says CEA

India’s growth has to be placed in the context of global economic activity

Chief economic advisor (CEA) V Anantha Nageswaran on Friday dismissed concerns that India’s projected GDP growth rate of 6.3-6.8 percent for the financial year 2025-26 by the Economic Survey signals a slowdown, arguing that the global economic environment must be considered while assessing the country’s growth trajectory.

“I would contest the statement that 6.3-6.8 percent acknowledges that we are in a slowdown. It is just that there was a natural rebound from a Covid pandemic-era economic growth contraction in 2021, which led to a few years of very high growth. But, if you look at the global economic activity index of the Federal Reserve Bank of Dallas, it has also been declining since 2023. So India’s growth slowdown has to be placed in the context of global economic activity trending down, and it is, in fact, in negative territory now,” Nageswaran told Moneycontrol in an interview.

He emphasised that with global investment and trade flows becoming increasingly uncertain, India’s current growth rate is reflective of these external conditions rather than a domestic economic slowdown.

“When global investment and trade flows are becoming problematic or more uncertain, you cannot call it a slowdown. It is something we may have to live with for some time until the global environment becomes more certain and conducive. That is all these numbers reflect,” he added.
Despite the challenges, the CEA maintained that achieving an 8 percent trend growth rate remains possible. “Why not? That is why, in this survey, we are focusing on things that we can do or need to do without necessarily relying on global factors,” he said.

With the global economic landscape remaining uncertain, India’s ability to sustain high growth will depend on domestic policy measures. The government’s approach, as outlined in the Economic Survey, aims to ensure that India continues to progress toward its long-term goal of becoming a developed economy under the ‘Viksit Bharat’ vision by 2047.

The Economic Survey 2023-24 released on January 31 laid out a roadmap to accelerate growth through a range of structural reforms, including deregulation, infrastructure development, and productivity-enhancing measures.

Deregulation

One of the key themes in the Economic Survey is the shift in regulatory philosophy from ‘guilty until proven innocent’ to ‘innocent until proven guilty.’ When asked whether this principle pertained to the recent increase in GST-related cases against businesses, the CEA dismissed such notions.

“In general, any economic system has a choice to allow economic activity to happen while accepting that some people will always find ways to cheat and evade. But if the focus is on ensuring that no one cheats or evades, then naturally, economic activity will be impacted,” Nageswaran explained.

He elaborated that excessive compliance measures can stifle economic growth and that regulators must strike a balance between enforcing compliance and fostering business activity. “That means you will suspect that everyone will be prone to cheating and evading; therefore, you will have extensive controls, reporting requirements, and compliance in place. But if you prioritise economic activity, you acknowledge that a small percentage will always look to exploit loopholes. In that case, you would not make regulations overly intrusive,” he added.

“This is a dilemma for all regulators and governments across the world. We were not talking of anything specific; this is a philosophical mindset that needs to apply. Are we going to make sure that economic activity is secondary to compliance, or is compliance secondary to facilitating economic activity?” he said.