Unlike the last fiscal year, when India’s GDP estimates exceeded the Economic Survey’s projection, this year’s first advance growth estimate at 6.4 per cent trails the forecast of 6.5-7 per cent. That’s a little slower than the pre-pandemic decadal average of 6.6 per cent. Alongside this, nominal GDP, which absorbs the impact of inflation, grew at 9.7 per cent, lower than the 10.5 per cent pencilled in by the budget.The global environment is unclear with policymakers staring at a raft of risks. Growth in the major economies has diverged. The US seems to be growing closer to its trend rate of 2 per cent in 2025 after a strong performance in 2024. China is slowing down, while Europe should be below trend despite some improvement in growth.Story continues below this adThe nature of risks is evolving with Donald Trump threatening to impose tariffs. India, which has a trade surplus with the US, will keep a close watch on these developments. Other geopolitical uncertainties await resolution. The Survey factors in these uncertainties, and presages India’s real GDP growth next fiscal year to range between 6.3 per cent and 6.8 per cent, close to Crisil’s call of 6.7 per cent.Multilaterals have also started lowering their growth expectations for next year. The IMF foresees 6.5 per cent for this and next year, while the World Bank has forecast 6.7 per cent for next year. Despite moderation, India will see the fastest growth amonglarge economies.Public and household investments have powered the post-pandemic investment recovery. However, private corporate investments have yet to show signs of a sustained increase. It is vital for the private sector to take over the investment baton from the government. The Survey notes that “the competition for investment is not only with other emerging economies but advanced economies, too, who are determined to keep their businesses at home”.Story continues below this adThe Survey believes that in the coming years, domestic-led levers will become more important for the Indian economy. It advocates pursuing deregulation to unlock the true potential of domestic-led growth over the medium term. In the near term, we believe it would be prudent for the budget to continue supporting capital expenditure while encouraging private investments. Fiscal consolidation can proceed gradually to accommodate this spending.The budget for this fiscal year had envisaged slower growth in capex at 17.1 per cent, compared with 28.2 per cent in 2023-24, amid normalising capital spending. It was still budgeted to grow faster than the nominal GDP, but that target is unlikely to be met given the low run rate of capital spending by the Centre and states.However, higher allocations alone will not suffice. In addition to boosting capital spending, focus is needed on reducing cost and time overruns. As of November 2024, almost 40 per cent of the central sector projects costing Rs 150 crore over-ran both the budget and deadlines. Having s
Sab. Feb 1st, 2025
