Growth of 7–7.5% this year not bad, inflation could persist: EAC-PM chairman

Dr. Bibek Debroy, Chairman, Economic Advisory Council to the Prime Minister.

Real gross domestic product growth of 7 to 7.5 percent this year would be somewhat satisfactory, according to the chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), who was citing various agencies’ estimates.

“India has performed relatively better despite the pandemic and despite the Russia-Ukraine conflict,” Bibek Debroy said at an event on June 15.

“This year also has a little bit of base effect because contact services are recovering.”

The World Bank recently slashed its growth forecast for India for the current financial year to 7.5 percent, from its previous forecast of 8.7 percent.

India's gross domestic product is estimated to have grown by 8.7 percent in the last financial year, largely due to a favourable base effect, as the economy had contracted 6.6 percent in FY21 because of the coronavirus pandemic and intermittent lockdowns.

A weak global economic outlook, spiking inflation, and a central bank that has started unwinding its pandemic-era stimulus have raised growth concerns in India.

Right now, it would be unrealistic to expect real GDP growth rates of 9 percent unless exports pick up substantially, which could be an issue as the external demand situation is not as rosy as it might have been, Debroy said.

Meanwhile, India’s current bout of inflation, driven primarily by high commodity prices, could persist for some time, he added.

"This kind of inflation is not as amenable to monetary policy instruments as it is not primarily demand driven," Debroy pointed out.