Estimates indicate that the economy will expand in real terms by 7.3%, up from 7.2% in the previous fiscal year. In its December meeting, the Monetary Policy Committee (MPC) of the Reserve Bank of India released a projection of 7%.
According to the assessment, the economy grew at a rate of 7.7% in the first half and may slow down somewhat in the second half. Since the projection is based on data from the first eight months of the year, it is also possible that it will be updated in the future. This is due to a possible slowdown during the last few months compared to the prior time frame. In comparison to all other major economies, the economy would have developed at a very good rate even if that were to occur.
Source: The Economic Times
The positive surprise of higher-than-expected growth may be somewhat tempered by disaggregated data. This year could witness a significant slowdown in the agriculture industry, which has been performing well for several quarters. It may only expand by 1.8% this year compared to 4% last year. That increase will be less than half of the 4% growth experienced by the sector last year, and it will be the worst in eight years. Due to the predicted decrease in the kharif output brought on by the unpredictable monsoon of the previous year, it might be even lower.
Sugar production is predicted to decrease by 11% and food grain production by 5%. Oilseeds and pulses will be particularly impacted. The future does not look good for Rabi either. This will have a negative impact on rural demand, which has historically been a growth engine. This year, the services sector’s growth is predicted to drop sharply from 14% to 6.3%. This will significantly affect people’s employment and wages.
Source: CNBC- TV 18
The fact that private final consumer expenditure is only predicted to expand by 4.4%—the lowest growth rate in 20 years, excluding the Covid period—is another significant cause for concern. Historically, private consumption has played a significant role in growth, but it has been muted in recent years.
10.3% growth in investment has been impressive, although this is mostly due to government spending. It can slow down in the upcoming months and is not sustainable. In fact, from October to November, it showed a fall to 8.8%. It should be mentioned that this year’s nominal GDP growth will only be 8.9%, compared to last year’s 10.5% growth. Therefore, while there are good reasons to be optimistic about the greater growth rate, caution is also warranted.
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