The Indian economy is likely to grow at the rate of 6.5 per cent in the coming decade on the back of the turnaround in financial and investment cycle, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Wednesday.
Addressing an event here, Nageswaran further said going forward, global exports growth volumes may be somewhat tepid in terms of their growth rates due to the kind of uncertainties the world is facing.
“So, I think the restoration of the financial, credit and the investment cycle in the commercial sector and the real estate sector will probably see us growing on an average of six and a half per cent in the coming decade,” he said.
The Asia’s third-largest economy recorded year-on-year growth of 4.4 per cent in October-December, down from 11.2 per cent a year back and 6.3 per cent in the preceding quarter.
The finance ministry’s Economic Survey has projected the economic growth to be 6.5 per cent in the 2023-24 fiscal beginning April 2023, while the RBI
Nageswaran attributed the slowdown in India’s economic growth just before COVID-19 pandemic to the classic financial cycle distress that India went through.
“If you look at data from 2012 onwards, so basically pre-pandemic period itself, we went through a period of classic financial cycle repair, credit cycle repair, which is what brought down a slowdown in the construction sector, and real estate sector,” he opined.
According to Nageswaran, in the second decade of the century, by the time India could start thinking of enjoying the repaired balance sheets, came the pandemic for two years.
“And then came the commodity price shock and later came the interest rate shock in the second half of the 2022,” he said, adding that so naturally, some of these things do induce uncertainty in the minds of private investors and they may be a little bit more cautious than they might have been.
Referring to India’s energy security, Nageswaran said there is tremendous pressure on energy transition for justifiable reasons.
“So there is no question of denying that there is a need for energy transition, but the question is how do we go about it?,” he asked.
Noting that developing countries including India, definitely need economic growth to finance their energy transition requirements, Nageswaran said without domestic savings, there is no question of adequacy of resources for financing energy transition.
While emphasising that to address climate finance, there is need to address economic growth first, he said somehow relegating economic growth and development to the second to the fringes to put climate issues on top of the agenda would be actually doing a disservice to the climate agenda.
“If we are going to attract so much private sector capital for climate transition or energy transition, what happens to the current account deficit?,” he wondered.
Replying to a question on production-linked incentive (PLI) scheme, the CEA said the exit clause is very important for any scheme.
The government has announced PLI schemes for 14 sectors, including white goods, textiles and auto components.
The objective of the PLI scheme is to make domestic manufacturing globally competitive, create global champions in manufacturing, boost exports and create jobs.