The new year has begun on a positive note: The economy is doing well. While the bull run on the bourses continues apace, the growth projection for the economy has now topped 7%. According to the latest data released by the National Statistical Office (NSO), the economy in 2023-24 is projected to grow at 7.3%. This is higher than the RBI’s projection of 7%. The latest NSO projection beats the marketmen’s estimate of between 6.5 to 6.7% growth. Whether this should spur another spell of bull run on the markets will be known when they open on Monday, but the latest data confirms that the government must be doing something right for the economic growth to remain on a high trajectory. The economy had grown 7.7% in the first half of 2023-24, and is projected to grow by 6.95% in the second half of the current year. The labour-intensive construction sector seems to have rebounded after the two-year hiatus imposed by the Covid pandemic. The NSO projects it to grow by 10.7% in the current financial. The services sector, the largest component in the GDP, is set to grow at 7.7% as against 9.5% last financial. The government sector investment is still a main driver of growth. The pick-up in bank credit growth is accounted for both government and private sector, the latter having slowed in the recent past following the pandemic fall-out. As the monthly collections of Goods and Services Tax show there is a general increase in demand coupled with a better compliance due to an increased digitisation of the economy. A general slowdown in the West accounts for a poor rate of export growth, but the current account deficit remains moderate, projected to be 1.1%.
Overall, there can be no denying that the Indian economy is one of the fastest growing in the world. While the overall global economic growth is projected to slow down from 2.7% to 2.4%, the Indian economy by all estimates is set to grow about 7%. With consumer inflation under control, unless of course there is a steep increase in the global commodity markets, the economic outlook for the incumbent regime when it seeks a fresh mandate in April-May this year is unlikely to pose a problem. Even the share markets might witness a continued bull run, given that the US Federal Bank has broadly hinted at a gradual rollback of the high interest rates.
Meanwhile, the advance NSO data ahead of the interim Budget on February 1 ought to make Finance Minister Nirmala Sitharaman’s task much easier. She will be able present what can be called a please-all budget ahead of the Lok Sabha poll. Hopefully, she will succeed too in keeping fiscal deficit under check which had shot up in recent months due to higher government spending on schemes such as free food to over 85 crore Indians. Considering that a fresh election is due in a few months belt-tightening may prove difficult to keep the deficit at the budgeted 5.9% of the GDP. However, critics will lament that the fruits of a relative high economic growth still leave the poorer sections behind, but eventually the trickle-down effect will leave none untouched. Otherwise, how does one account for a near-universal use of cell phones. Or the widely acknowledged fact that no longer does an Indian go to sleep hungry. Yes, there are wide disparities in income levels, but that is a given in a growing open economy regaining the growth momentum after the stagnation of the socialist decades followed by a grudging unshackling of the economy. It will take a steady growth rate of 7 to 8% over a prolonged period for India to wipe out poverty altogether. But as the NSO projections confirm we seem to be on the right track.
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