CEA Nageswaran says Q1 GDP growth number ‘good’, maintains FY24 forecast of 6.5%

Nageswaran said India’s quarterly GDP growth towers over that of many other economies.

The April-June GDP growth rate of 7.8 percent is a "good number", Chief Economic Adviser V Anantha Nageswaran said, adding that the Finance Ministry and the Reserve Bank of India (RBI) are comfortable in holding on to their full-year growth forecast of 6.5 percent.

"At the moment, the central bank and the Ministry of Finance are quite comfortable with the 6.5 percent real GDP growth outlook for 2023-24," the government's top economist said on August 31.

Nageswaran was speaking to reporters after data released by the statistics ministry showed India's GDP grew by 7.8 percent in April-June, slightly higher than the consensus estimate of 7.7 percent but lower than the RBI's forecast of 8 percent.

"When I spoke to you at the end of May, I did say that compared to what we said in January in the Economic Survey - wherein we said that the downside risk factors were higher than the upside surprises to the 6.5 percent forecast - the risks are now evenly balanced around our central expectation of 6.5 percent. We maintain that view," Nageswaran said.

"We are not saying that downside risks dominate the upside to this estimate of 6.5 percent. One of the main reasons for that is that rural demand is recovering and private sector capital formation is recovering, services sector exports are compensating very well for the slowdown in merchandise export growth, bank credit to MSMEs and agriculture are growing as well and so are other indicators of employment and demand generation. So overall, this is a good number," he added.

Source: Chief Economic Adviser V Anantha Nageswaran

Commenting specifically on rural demand, Nageswaran said what was previously a "small upward blip" had become "very highly visible and significant". Further, he said anecdotal information from high-value fast moving consumer good (FMCG) companies was indicative of growth not being concentrated in just large metro cities but even in small towns and villages.

"So this pick-up in rural demand for FMCG items is not something that is distorted by statistical, very small set of centres, but it is fairly widespread," he said.

Regarding investments, Nageswaran said the Centre's capex push was clearly "paying off" as it was crowding in the private sector.

According to data released on August 31 by the Controller General of Accounts, the Centre's capex in April-July stood at Rs 3.17 lakh crore, up 52 percent year-on-year.

However, Nageswaran noted that capital expenditure by states was also picking up "very significantly", although some states were spending more than others.

"It is very impressive to note that they are also now joining the capex creation bandwagon that the Union government has been championing over the last five to six years," he said, before reiterating that private investment was also doing well.

"Private capital formation is in general no longer an aspect of the economy that is waiting for a take-off. It actually has taken off," Nageswaran said.

According to the GDP data released on August 31, growth in gross fixed capital formation - seen as a proxy for investments - edged down slightly to 8.0 percent in the first quarter of 2023-24 from 8.9 percent in January-March and 20.4 percent in April-June 2022.