NEW DELHI: Indian economy can grow by 7% in the second half of the current financial year going by the pickup in economic activity, which could uplift the full-year growth rate to at least 6.5%, chief economic advisor V Anantha Nageswaran on Thursday said.
Speaking at an industry body Assocham event here, Nageswaran said India Inc. had ‘never had it so good’ profitability despite a challenging environment post-Covid. Now is the time for them to invest and create employment, he sadded.
After the GDP rose by 5.4% in July-September year-on-year, the lowest in seven quarters, some analysts feared that FY25 growth may come in below 6.5%. The H1FY25 growth has come in at 6%.
The finance ministry’s top economist said the Q2FY25 GDP growth rate of 5.4% could be revised upwards going forward, as the current estimates are not seasonally adjusted.
“To be able to hit 6.5% growth for the year as a whole, we need a 7% real GDP growth in the next two quarters of which two months are already over in the third quarter. We are in the third month,” he said.
“I think that it is doable if you look at some of these pickups that have happened in specific areas. So I believe that a growth outcome in the range of 6.5-7 per cent is feasible for the year.”
The adviser said India’s underlying growth story still remains very much intact. The Reserve Bank of India had projected growth to be 7.2% for FY25.
Nageswaran said India should focus on domestic levers for boosting economic growth as global factors remain “far from conducive. “We are entering a world of difficult goods export growth.”
Noting that the Economic Survey estimates that India requires to create 8 million jobs each year, the economist said the private sector needs to find the right balance between capital-intensive and labour-intensive growth.
While the industry keeps complaining about the cost of capital, Nageswaran said: “Notwithstanding all the issues that India’s corporate sector may have with governments, union and state, on taxes, on the cost of capital, on procedures, on customs duties, etc, the truth is, Indian corporate sector has never had it so good as it has in the last four years.”
Indian private sector profitability was at a 15-year high of 4.8% of GDP in March 2024 was impressive given post-COVID challenges and the difficult global environment, he said. The previous high was 5.2% of GDP profit after tax in March 2008, which was a boom era.
He assured the industry that deregulation of government rules will be a theme in the upcoming economic survey for 2024-25.
He also asked the corporates to be considerate towards MSMEs. “If you look at aggregate data, India’s large corporate sector actually has a negative working capital with its suppliers. In other words, instead of being a source of finance for small and medium enterprises, India’s large corporate sector actually uses them as their source of finance.”
He said there is much need for reflection on the part of the corporate sector on the issue while the government is doing all it could to support MSMEs including improving access to finance.
Source: The Financial Express
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