Chief economic advisor V Anantha Nageswaran on December 5 cautioned against ‘overinterpreting’ the sharp fall in gross domestic product (GDP) growth in the second quarter of the current financial year as India’s growth story “remains intact”.
“In view of Q2 GDP of 5.4 percent, we should not throw the baby out with the bathwater, as underlying growth story remains intact,” the CEA said at Assocham’s Bharat@100 Summit ‘Fuelling Bharat's Global Rise’ .
Nageswaran argued that the drop in economic growth “should not be overinterpreted as spike in global uncertainty index”.
He added that private consumption has held up and exports have improved in the challenging environment.
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India's economic growth slowed down in the September quarter to a 7-quarter low of 5.4 percent on contraction in mining growth, manufacturing and utility services. The second quarter number has now clouded the outlook for the full year growth estimates, according to experts.
However, the CEA believed the global environment is not conducive for India.
"India’s path to lower middle income to upper income is during the scenario when the relative periods of global peace are becoming scarce. Global environment is far from conducive for us, we have to pull all domestic levers for growth," he said.
India also needs to integrate itself with China's supply chain to unlock the global supply chain, which can provide a further boost to growth, the CEA argued.
Nageswaran also said that with pick-up in some sectors, achieving a GDP growth of 6.5 percent to 7 percent in FY25 is "still feasible". "To achieve 6.5 percent GDP in FY25, we need 7 percent real GDP growth in Q3 and Q4, which is doable with pickup in some areas."
The top economic advisor also noted that overall headline inflation is "well-behaved". He pointed out that "some specific food items contributed to sharp rise in inflation, but confined to a small percentage of the overall CPI basket of goods and services".
On Friday, the Reserve Bank of India may provide a liquidity push in its upcoming monetary policy committee by announcing a cut in the cash reserve ratio (CRR).
According to experts, the move could help infuse liquidity in the banking system and lead to credit growth and investment that will spur growth.
Weak GDP numbers have fuelled speculation that the central bank may go for a cut in CRR even if it decides to go against reducing the repo rate.
The likelihood of the move fuelled a rally in the Bank Nifty on December 4 as the index rose over 1.3 percent, while Nifty PSU Bank and Nifty private bank also gained more than a percent.
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