India’s economy to grow at 6.3% to 6.8% on the back of tax cuts, good monsoon, and global trade shifts: CEA V Anantha Nageswaran
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India's Chief Economic Adviser (CEA) V Anantha Nageswaran today said that several silver linings on the macro-economic front, like favourable monetary policy, tax relief and expectation of good monsoon, will lead to a sustained GDP growth rate of 6.3% - 6.8% for the longer term.
"India has a few silver linings. Energy prices are much lower. Regardless of how the tariff numbers will play out after 90-day expiration from the liberation day, or 90 days given to China, there will be some sectors where India did not enjoy an advantage before, but may enjoy an advantage later from tariff perspective," Nageswaran said at the CII Annual Business Summit.
"Monetary policy has become less unfavourable for growth this year, compared to the course of 2024. The government's major tax relief given to the middle-class kicks in this financial year," he said.
"Progress of monsoon is good and there an expectation that it will be above average, and it is likely to be well distributed," Nageswaran said.
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He also pointed out that the Indian currency will not weaken like it did in the last thirty years.
"With these positive factors, achieving growth rate pencilled in the Economic Survey
between 6.3%-6.8%, and sustaining it for a longer period seems like a reasonable prospect," said Nageswaran.
Pointing to the corporate profitability not being ploughed back as investments in the economy, Nageswaran said the gap between capital formation and profitability growth needs to be closed.
"Growth in profitability has also trailed income growth. The business sector needs to give it a thought, given the 2047 goals. Ultra processed foods, screen time a huge risk to demographic dividends," he said.
On the policy front too, much more needs to be done, Nageswaran pointed out. He said there are medium term economic challenges to India's growth.
"India is a labour rich country but has inherited a capital-intensive growth model. Meeting India's capital needs requires steady household income and savings growth. These are the challenges," he said.
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