Q3 GDP: CEA Nageswaran says case for global agencies to raise view on India's potential growth to 7%, if not more

The government’s top economist was speaking to reporters from Brazil after the release of the GDP growth data for October-December 2023.

The latest GDP growth print and the country's continued out-performance is making a case for international organisations to raise their estimates of India's potential growth rate to 7 percent or even higher, Chief Economic Adviser V Anantha Nageswaran has said.

Speaking to reporters virtually from Brazil, where he is part of the Indian delegate for the G20 meetings, Nageswaran said on February 29 that the structural transformation that is taking place in India should be recognised.

"The actual performance of the economy has continued to defy expectations and do better than what many had projected, underscoring the fact that a structural transformation of the economy is indeed underway – both in terms of physical infrastructure and digital infrastructure as well as the inclusion agenda boosting the purchasing power of Indian households which we saw in the household consumption expenditure survey data," Nageswaran said.

"So there is a case for international agencies to reappraise their estimate of potential GDP growth in India closer to 7 percent, if not above," he added.

Nageswaran's comments came immediately after the statistics ministry said India's GDP growth rate surged to a six-quarter high of 8.4 percent in the final quarter of 2023, comfortably beating all expectations. A Moneycontrol survey had shown economists expected growth to slow down to 6.5 percent in October-December 2023 from 7.6 percent. Instead, growth rose to 8.4 percent from July-September's revised estimate of 8.1 percent.

Nageswaran admitted that the bump up in the second advance estimate of the full-year growth for 2023-24 to 7.6 percent from 7.3 percent was aided by a favourable base, with the statistics ministry lowering its estimate of growth in 2022-23 by 20 basis points to 7.0 percent.

One basis point is a hundredth of a percentage point.

However, Nageswaran remains bullish, saying any risks to India's growth came from abroad.

"Overall, the Indian economy ticks many boxes in the right way continuing to grow at around 7 percent. And if there are question marks that are coming, they are coming from the external world because of the continued geopolitical uncertainty and moderate to slower economic growth elsewhere," he said, adding that there could be repercussions from any global risk aversion if the financial market exuberance in developed nations became "more realistic".

The government's top economist also cited electoral uncertainty as another form of external risk.

"It is a year of elections not just in India, but in several parts of the world. And outcomes so far have been somewhat unexpected in several countries, and those in turn have imposed their own uncertainties on their macroeconomic policy frameworks and growth prospects. So these are the external risk factors that we have to bear in mind," he said.

Commenting further on the latest GDP data, Nageswaran said that while agricultural sector growth had been "somewhat lacklustre" due erratic monsoon, he was hopeful for the future due to rabi sowing being "quite good" and predictions about the withdrawal of El Nino, which would allow for a normal monsoon in 2024.

"So, agriculture sector value added should rebound in FY25 and that would naturally boost rural incomes as well," he said.

Also Read: Agri growth in FY25 should be well above 3%, says MPC's Shashanka Bhide

As per the latest data, agricultural growth is seen slowing down to just 0.7 percent in 2023-24 - the weakest in eight years.

As for the decline in the share of private consumption expenditure in the GDP to 55.6 percent in 2023-24 from 58.0 percent in 2022-23, Nageswaran said it was an "understandable" decline and was not suggestive of a slowdown in demand but other sectors of the economy picking up and demand growth being "more evenly distributed than before".