India’s economy to grow at 6.5-7% over medium term, says CEA Anantha Nageswaran

CEA V Anantha Nageswaran (Illustration: Moneycontrol)

India’s economy should grow at the rate of 6.5 percent to 7 percent over the medium term in response to deleveraging of corporate balance sheets and the government’s reform measures, the finance ministry’s chief economic adviser (CEA) V Anantha Nageswaran said on November 7.

“Medium-term outlook is good… because of balance sheet strength, as corporates are willing to invest, manufacturing activity continues to expand and digital infrastructure (is) becoming more and more important in improving access to finance and formalisation," Nageswaran said at an event organised by the Indian Chamber of Commerce.

The government is expected to present its budget for the next financial year on February 1 amid expectations that it would continue with its infrastructure spending to boost medium-term growth.

India will be among the fastest-growing economies this year despite global headwinds, including financial market volatility and sharp monetary tightening across the world.

The global monetary tightening is becoming a little less synchronised, a small relief for developing countries, the chief economic adviser said, citing recent commentary by some developed world central banks.

While the world is facing a polycrisis—multiple simultaneous entangled crises—India is doing better on both growth and inflation fronts and will reap the rewards of the hard work done over the last several years, Nageswaran said.

The country now must focus on macroeconomic stability, direct tax reforms, further changes to goods and services tax, completion of ongoing capex projects and addressing challenges faced by micro, small and medium enterprises, Nageswaran said.

Moreover, the government needs to ensure that fiscal policy does not become a drag on the private sector by raising the cost of borrowing, the CEA added.

India has recently seen sharp cuts to its growth forecasts for this year and the next.

The Reserve Bank of India expects the economy to grow 7 percent in the financial year ending March 31, much lower than the 7.8 percent it had estimated earlier this year.