On the latest episode of The State of the Economy podcast, Shishir Sinha discusses the strong GDP figures and the importance of managing inflation in the coming quarters to the Indian economy with ICRA Chief Economist Aditi Nayar.
One of the central themes of the episode was India’s GDP growth rate, which rose to 7.8% in the April-June quarter, a sharp jump from 6.1% in the previous quarter.
GDP, GST collection and fiscal deficit together paint a rosy picture that the Indian economy is on an upward trajectory, but what does that mean?
This State of the Economy podcast explores the factors behind this robust growth. Aditi warned against comparing year-on-year growth due to the unique circumstances of the first quarter of fiscal 2024, which followed the initial recovery phase of the pandemic-induced lockdown in the first quarter of fiscal 2023.
Nayar provided a nuanced analysis of GDP growth, focusing on the expected performance of the manufacturing sector. She said that while margins in the corporate sector had improved due to lower commodity prices, the explanation for the growth was complicated, especially given the role of the unorganized sector and volume indicators.
Private consumption, investment activity and government spending are the three pillars of economic stability discussed in detail. Aditi highlighted mixed trends in these areas, emphasizing that private consumption remains resilient despite inflationary pressures.
With the general election looming, Aditi highlighted the government’s efforts to bring forward capital spending to ensure that budget targets are met. Central tax devolution and capital expenditure loan schemes are also in the spotlight as indicators of the government’s commitment to infrastructure investment.
The podcast delves into high-frequency indicators such as core industry growth and manufacturing PMIs, taking a comprehensive look at their importance and potential impact on overall industrial production.
GST collection remains stable and supports the fiscal landscape. However, inflation has emerged as a concern, with volatile food prices and erratic monsoon patterns posing challenges.
Aditi hinted at revising the full-year GDP forecast in a cautious manner, maintaining the 6% growth forecast while acknowledging the dynamic nature of India’s economic landscape.
(Moderator: Shishir Sinha; Producer: Anjana PV)
About the State of the Economy Podcast
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