National Council of Applied Economic Research
NCAER holds discussion on IMF’s ‘World Economic Outlook & India: What Lies Ahead’
NCAER on Wednesday hosted a discussion on “World Economic Outlook & India: What Lies Ahead”. The three-member panel for the discussion comprised Dr Poonam Gupta, NCAER Director General and Member of Economic Advisory Council to the PM; Dr V. Anantha Nageswaran, Chief Economic Advisor to the Government and Dr Auguste Tano Kouame, World Bank’s Country Director for India. The discussion was preceded by presentations from IMF economists, Dr Mehdi Benatiya Andaloussi and Dr Nicolas Fernandez-Arias.
Speaking on the occasion, Dr Nageswaran said with supply-side investments on both physical and digital infrastructure, Indian economy is better placed to pursue non-inflationary growth and could achieve a GDP growth rate of above 7% this year, based on its domestic strengths.
“We need to recognise the geo-political and geo-economic context. We can achieve moderate to high growth over a long term … Small and medium sector is the backbone. We need them to grow their share in manufacturing. We also need to strengthen the supply-side infrastructure to have longer economic cycles and prevent overheating of the economy every 4-5 years, besides having financial inclusion, skilling, and electricity reforms,” said Dr Nageswaran.
Dr Poonam Gupta said, “The IMF has projected acceleration in global growth and world trade volumes, decline in inflation rates, and oil prices to remain around the current levels. Based on its domestic strengths and a favourable global outlook, the Indian economy may be expected to grow at 7 plus rate this year and next.”
More importantly, she pointed out that India’s population growth rate had slowed down from 2.1% in the 1990s to almost 1% now, thus, translating GDP growth into bigger per capita income.
Dr Gupta said India’s GDP growth rate has become more resilient due to macroeconomic stability with various shocks, which mattered in the past, impacting it much less now. “With clear electoral verdicts, policy risks have become less; agriculture has become a little bit more decoupled from rainfall; large forex reserves have blunted effect of flight of capital due to any global disruption; and cleaning up of the financial sector has led to faster credit growth,” she said.
Earlier asked about inflation, Dr Nageswaran said, “With above normal monsoons, it is expected to come to the mid-point (4%) of the RBI’s target range. We don’t see at the moment any scope for nasty upside surprises yet there can always be scenarios in geopolitics that cause the inflation to spike.”
Dr Gupta also noted that despite fiscal deficit and public debt remaining high in India, their quality had improved. She suggested that instead of reducing government expenditure, the focus ought to be on enhancing “expenditure efficiency” and increasing revenue.
Dr Auguste Tano Kouamé said the Bank is to soon update its forecasts for FY24 and FY25 wherein the growth rates are likely to be upgraded because the signs are positive. “The uncertainties that were discussed are more due to the global economy and not the Indian economy,” he said.
“If India is able to maintain a growth rate of 6.5-7 percent in this global environment, then under more benign circumstances, it could possibly reach an 8 percent growth rate if the world economy remains stable,” he added.
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