He also said that the moderation in commodity prices augurs well for inflation, with retail inflation expected to ease to around 4%, the mid-point of 2-6% target for the RBI‘s monetary policy committee. Retail inflation has cooled down to 4.7% in April after topping 6%, providing cheer to policymakers.
“In the Economic Survey we mentioned that 6.5% was our estimate of real GDP growth for this financial year, but we also mentioned that risks to downside were higher. Now, we are prepared to stick our necks out one more time and say that the risks to 6.5% are probably more evenly balanced… we look forward to another year of solid economic performance by India,” Nageswaran told reporters.
The economy grew 7.2% in 2022-23, faster than the earlier estimates of 7% and the RBI’s projection of 6.8%. “Services sector has maintained its momentum, industrial sector growth rate (is) positive but slowing compared to 2021-22 because of the rise in commodity prices in the course of 2022-23 and rise in interest rates… the manufacturing sector has ended its two quarters of year-on-year contraction and resumed a pretty brisk positive growth in the fourth quarter,” the CEA said.
He said that urban demand remained robust and there were indications of a recovery in rural demand. With capacity utilisation in several sectors crossing 75%, private sector investment in creating new capacity or adding to existing ones will firm up. And, with government’s focus on infrastructure continuing, construction activity, which saw double-digit growth in the fourth quarter, is expected to generate fresh demand.
“Much of the employment elasticity comes from the construction sector and will lead to migration back to urban areas. This will result in income transfer to rural areas and increase in consumption in rural areas,” the CEA said.
