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Business Standard
21-06-2025
- Business
- Business Standard
India to face limited inflation impact from oil surge: CEA Nageswaran
India's top government adviser said rising oil prices are likely to have a limited impact on inflation for now and Asia's third-largest economy remains in a relatively favorable position to weather global risks. While high oil prices due to the ongoing crisis in the Middle East is a matter of concern, 'it is still not something that is going to be significant in terms of impact,' Chief Economic Adviser V. Anantha Nageswaran said in an interview on Friday. Cooling inflation, ample liquidity and low interest rates will provide the right conditions for India's economy despite global uncertainties, he added. Brent crude prices rose 20 per cent in the last one month as tensions between Israel and Iran escalated. Soaring oil prices can put pressure on the South Asian nation that is the world's third-biggest importer of crude. It can also stoke inflation and hurt household incomes in a country where private consumption accounts for as much as 60 per cent of the gross domestic product. 'It is too soon to get overly concerned yet,' Nageswaran said, adding that India will be able to absorb the impact of high crude prices if they are short-lived. 'I think it might have to take more than a quarter or even getting into a couple of quarters before we really have to worry.' The government expects the economy to expand 6.3 per cent to 6.8 per cent for the fiscal year ending March. While that pace is lower than the 8 per cent average seen in the last couple of years, India still retains the world's fastest-growing major economy tag. Nageswaran said good monsoon rains, that irrigate more than half of the country's farmlands, will also bode well for the economy. 'The underlying price pressures are quite absent and ample rainfall will also aid India's economy,' he said.
Mint
17-06-2025
- Business
- Mint
Indian economy faces crosswinds with mounting global shocks
New Delhi: India's post-pandemic growth story may be heading into rougher waters. Economists warn that the finance ministry's projected gross domestic product (GDP) growth of 6.3% to 6.8% for FY26 could come under pressure as global headwinds, rising geopolitical tensions, volatile capital flows, trade disruptions and weak private investment intensify. On the domestic front, India must address challenges in private sector investment and weak urban demand. Trump's tariffs hit export-heavy Asian economies like China and Vietnam harder than India, which leans more on domestic consumption. Also read: CBDT probes crypto-related tax evasion Still, headwinds at home led chief economic advisor V. Anantha Nageswaran to urge India Inc. in February to step up domestic investment to sustain long-term growth. Reviving demand While benign inflation and a manageable current account deficit have been a buffer against global headwinds, economists said sustaining momentum will require deeper demand-side support and a sharper pickup in private capital spending. Devendra Kumar Pant, chief economist at India Ratings & Research, said private sector investment will pick up once demand is broadly revived. 'Earlier, rural demand was an issue, but in the last year, urban demand has been struggling. On top of it, sluggish global demand makes it difficult for across-the-board demand and thus investment revival," he added. A recent report by Axis Securities stated that fast-moving consumer goods (FMCG) companies reported a muted performance in Q4 FY25 due to continued weakness in the urban market, subdued demand environment and increased competition. Also read: What 16th Finance Commission's thinking on giving higher tax share to states Urban markets account for about 50-60% of total FMCG sales, the report added. Government capex According to the ministry of statistics & programme implementation data, Gross Fixed Capital Formation (GFCF), which indicates investment demand, picked up pace to 9.4% in Q4 FY25, as against 5.2% in Q3 FY25 and 6% in the year-ago period. However, much of India's recent capital expenditure has been powered by the government, with central capex doing the heavy lifting in the absence of a broad-based private investment revival. For FY26, the Centre has pegged capex at ₹11.21 trillion, a slight uptick from ₹11.11 trillion (budget estimates) in FY25. Sustaining 7%+ growth on government capex alone is mathematically possible in the short term but structurally unsustainable beyond the near term, said Rishi Shah, partner and economics advisory lead at Grant Thornton Bharat LLP. Shah said while India's consumption challenge runs deep, with household spending making up nearly 60% of GDP—and urban consumption remaining held back by weak jobs and uneven income growth—consumption and investment must grow together to sustain long-term growth. 'The realistic path to 7%+ growth involves using the current government-led (capex) phase to create conditions for private sector revival while ensuring consumption support through employment generation," he said. 'It's a delicate balance, but one that needs to be successfully navigated," he added. Meanwhile, foreign portfolio investors (FPIs) pulled out $3.2 billion in June (till 10 June), undoing May's $3.6 billion inflow, rating agency CareEdge said in a report last week. Also read: Retail inflation cools to a six-year low of 2.82% in May on moderating food prices So far in 2025 (till 10 June), net outflows stood at $9.8 billion, driven by $11.2 billion in equity exits, partly offset by $1.6 billion in debt inflows, with volatility likely to persist in FY26, it added. Spotlight on policy agility The finance ministry's latest economic review, released last month, flags mounting global headwinds, from rising policy uncertainty and volatile trade shifts to escalating geopolitical tensions, demographic pressures and climate-related disruptions. The International Monetary Fund's latest World Economic Outlook warned that the global outlook remains clouded by inflation, debt burdens and shrinking labour forces in advanced economies. India's growth momentum will hinge on strong domestic demand, driven by consumption, investment and exports, with key engines being private spending, capital formation and a steady export push, said D.K. Srivastava, chief policy advisor, EY India. 'There would remain an atmosphere of uncertainty regarding the contribution of net exports. Both monetary and fiscal policy should be continuously calibrated to minimize the volatility of growth," he said. Srivastava said government-led capex is likely to remain India's key growth engine for at least two more years and with rising geopolitical tensions, a greater share may shift toward defence. 'At any rate, infrastructure deficiencies in India must be overcome to make Indian industry more competitive. As global demand picks up, the contribution of net exports to India's GDP growth will become stronger and reliance on government capex may be eventually reduced," he added. Policy bets To be sure, policymakers are betting on an above-normal monsoon, easing interest rates, and robust government capex to drive growth and shield the economy from global headwinds. 'There's cautious optimism for FY26, with India projected to grow between 6.3% and 6.8%. Even if global headwinds intensify, 6.3% appears to be the lower bound, while 6.8% is achievable if global conditions remain supportive," said a senior official who did not wish to be named. The official cited opportunities from upcoming trade deals (with the US and EU), a growth-friendly monetary policy stance, middle-class tax relief (announced in the latest budget), and a well-distributed monsoon as key tailwinds for the economy. The World Bank projects India's economy to grow at 6.3% in FY26, while the International Monetary Fund pegs it slightly lower at 6.2%. In its Global Economic Prospects-June 2025 report released last week, the World Bank emphasized that global risks are intensifying, with the spectre of further trade barriers and heightened policy uncertainty looming large. It also highlighted concerns about higher-than-expected global inflation, which could lead to tighter financial conditions, potentially weakening regional currencies and spurring capital outflows. India's growth is robust, but global shocks now outpace policy responses, squeezing margins and shaking markets, warns Grant Thornton Bharat's Shah. 'Our economy has built substantial buffers and adaptive capacity, but even the most resilient systems face stress when global policy uncertainty becomes the dominant variable," he added.
The Hindu
12-06-2025
- Business
- The Hindu
CEA to speak on India's growth story at Raj Bhavan
V. Anantha Nageswaran, Chief Economic Adviser to the Union government, will deliver a talk on 'Global economic trends: India's challenges and prospects' at Kerala Raj Bhavan on June 17 at Kerala Raj Bhavan. Governor Rajendra Vishwanath Arlekar will preside over the function. Dr. Nageswaran will present India's opportunities and the challenges that lay ahead for planners and policymakers alike in the context of India becoming the fourth largest economy of the world in terms of gross domestic product (GDP). Such factors, along with economic diplomacy, international trade and tariff, and the Prime Minister's call for Make in India (Atma Nirbhar Bharat), will form part of the discussions, the Raj Bhavan stated in a press release.
The Hindu
01-06-2025
- Business
- The Hindu
Growing pains: Economic performance, Viksit Bharat
The data on India's economic performance in 2024-25, released on Friday, have something for everybody. Those with an optimistic outlook can rejoice at the seemingly robust growth in the fourth quarter. Pessimists can despair over the four-year low annual growth figure. The realist's assessment, however, is that there is cause for some restrained celebration, and more than a healthy dose of disappointment. The Q4 growth of 7.4% was considerably higher than what was expected for the quarter, and the fastest seen in an otherwise dismal financial year. The main drivers were the construction sector returning to double-digit growth, and the agriculture sector posting a strong showing. These are also two major employment drivers. Services, too, continued their steady and strong growth. The manufacturing sector, on the other hand, grew at just 4.8%, down from 11.3% in Q4 of the previous year. There is a reality check hiding in the aggregate numbers, as well. The GDP growth rate of 7.4% was achieved in large part due to a 12.7% growth in net taxes. This bump in tax collections provided a statistical boost without which growth in actual economic activity would have come in at around 6.8%. The much-hyped 'Maha Kumbh effect' on consumption expenditure also does not seem to have materialised. Growth in Private Final Consumption Expenditure in Q4 — the Kumbh quarter — came in at 6%, the slowest in five quarters. Capital formation, however, grew a robust 9.4% as the government finally sped up its sluggish capital investments. Government officials and Union Ministers have expressed their satisfaction at the 6.5% growth in 2024-25, the slowest since the pandemic, saying it is still the fastest among major economies, and not bad in the context of a 'growth-scarce' global environment. All of this is true. Yet, 'not bad' is not nearly good enough for India. The race is not with the rest of the world, but is an effort to keep pace with the country's growing requirements. The Modi government, with its sights set on a 'Viksit Bharat' by 2047, must be held to a higher standard in line with its aspirations. If, as the Economic Survey points out, Viksit Bharat by 2047 requires 'sustained economic growth of close to 8% every year for at least a decade', then India is decidedly moving very slowly, even if in the right direction. In his press conference, Chief Economic Adviser V. Anantha Nageswaran said India was entering a phase of low inflation and stable growth. Stability can be good, since it implies lower chances of growth slowing. Yet, it also implies growth is unlikely to accelerate significantly either. The government needs to consider whether this is truly a satisfactory situation for a transitioning economy.
The Hindu
31-05-2025
- Business
- The Hindu
Editors pick newsletter GDP growth at 6.5% in 2024-25, slowest since the pandemic
While a significant uptick in economic activity in the fourth quarter (Q4) of financial year 2024-25 pushed Gross Domestic Product (GDP) growth for the full year to 6.5%, as per the provisional estimates for 2024-25 released by the government on Friday, this is the slowest since the pandemic year 2020-21. As per data released by the Ministry of Statistics and Programme Implementation, real GDP growth in Q4 of 2024-25 accelerated to 7.4%, the fastest quarterly growth in the year. It was still slower than 8.4% growth seen in Q4 of the previous financial year. Quarterly GDP growth in Q3 stood at 6.4%. Chief Economic Adviser V. Anantha Nageswaran, in a press briefing following the release of the data, sought to downplay the post-COVID slowdown of the economy, saying that India has held its own in a 'growth-scarce' global environment. 'If you look in real terms, India's growth rate differential in comparison to the average growth rate of advanced economies was on the lower side during the 'boom era' between 2003 and 2010,' Mr. Nageswaran explained. 'The growth differential post COVID is higher than the growth differential in the 'boom era'.' 'In other words, in a growth-scarce environment post COVID and despite the rising uncertainties due to political conflicts and trade tensions, India is holding up its growth numbers better than many advanced economies,' he added. The agriculture sector continued its strong performance in Q4, leading to a relatively strong showing for the full year. The 'Agriculture, Livestock, Forestry & Fishing' sector grew 5.4% in Q4 of the year, up from 0.9% in Q4 of 2023-24. This helped propel the full year's growth for the sector to 4.6% in 2024-25, up from 2.7% in 2023-24. The manufacturing sector's growth stood at 4.8% in Q4 of FY25, the second fastest quarterly growth in the year, on a high base of 11.3% in Q4 of the previous year. The sector grew 4.5% in the full financial year 2024-25, down from 12.3% in 2023-24. The construction sector returned to double-digit growth of 10.8% in the fourth quarter, the fastest in the year, and faster than the 8.7% seen in Q4 of 2023-24. The sector's full-year growth stood at 9.4% in 2024-25, down from 10.4% in 2023-24. Growth in the tertiary sector — a composite of all the services sectors — stood at 7.3% in Q4, in line with the growth in Q2 (7.2%) and Q3 (7.4%). Growth in Q4, however, was slower than the 7.8% seen in the fourth quarter of 2023-24. In the full year 2024-25, the tertiary sector grew at 7.2%, lower than the 9% in the previous year. The data released on Friday also showed that growth in household consumption quickened to 7.2% in 2024-25 from 5.6% in the previous year. Gross Fixed Capital Formation, a measure of asset creation by the public and private sector, saw growth slowing to 7.1% in 2024-25 from 8.8% in 2023-24. This is despite growth in this spending quickening to a six-quarter high of 9.4% in Q4. For FY26, the Reserve Bank of India has cut India's growth forecast to 6.5% from 6.7% estimated earlier for the current financial year on account of impact of global trade and policy uncertainties. In another set of numbers, the Government has met its fiscal deficit target of 4.8% of GDP in 2024-25 though total receipts came in slightly lower than expected, as per data released by the Controller General of Accounts. The Centre's total revenue — counting tax, non-tax and capital receipts — came in at ₹30.78 lakh crore in 2024-25 or 97.8% of its revised estimates for the year. Total expenditure stood at ₹46.55 lakh crore, also 97.8% of the estimates. The fiscal deficit, the difference between total expenditure and total revenue, at ₹15.77 lakh crore, stood at 4.8% of GDP based on the latest provisional estimates for the year. As part of the Centre's fiscal consolidation glide path, Finance Minister Nirmala Sitharaman had, in Budget speech in February, targeted fiscal deficit of 4.4% of GDP for FY26. Closer examination of the data show total revenue fell short of the revised estimates due in large part to a shortfall in miscellaneous capital receipts, that includes disinvestment proceeds. There was also a minor shortfall in tax revenue. The Centre earned ₹17,202 crore as miscellaneous capital receipts or just 52.1% of revised estimates for FY25. Department of Investment and Public Asset Management data show the government earned ₹10,131.32 crore via disinvestments in 2024-25. Corporate tax collection at ₹9.87 lakh crore in FY25 was 0.7% higher than revised estimates. Income tax collections, on the other hand, at ₹11.83 lakh crore were almost 6% lower than revised estimate. The Hindu's Editorials The Hindu's Daily Quiz Which of the following States has been under President's rule since February 13? Assam Meghalaya Manipur Nagaland To know the answer and to play the full quiz, click here.
