Economic Survey 2024: Real GDP growth projection for FY25 at 6.5-7 percent is a realistic target, says CEA Nageswaran 

Chief Economic Advisor V Anantha Nageswaran said that the real Gross Domestic Product (GDP) growth projection for FY25 between 6.5 percent and 7 percent is a more realistic target. 

In an exclusive interview with BTTV’s Managing Editor Siddharth Zarabi, the CEA decoded the Economic Survey 2024 findings and shed light on the way ahead for the economy, future prospects, employment, GDP growth among other aspects. 

Speaking to Zarabi, Nageswaran attributed the government’s cautious approach to a patchy monsoon distribution, rising geopolitical tensions and elevated risks in the financial markets. 

“We are not saying 7 percent is out of the realm of possibility we think it’s possible. We are simply taking into account some of the headwinds that have developed and are trying to be prudent rather than cautious. We are optimistic and we made it very clear that we are very upbeat about the Indian economy’s prospects but there are external factors beyond our control, which when they happen or when we see a higher likelihood of happening, we just need to take cognizance and that is what we are doing,” he said.  

Highlighting the concern about inflation, the CEA said that on a headline basis “inflation is well behaved”. He agreed that inflation in specific commodities like food have been elevated but the impact of food in the overall CPI basket is coming down and therefore the central bank’s projection of inflation slowly making its progress towards the 4 percent mark. “I think we are on track,” he said. 

Shedding more light on the Economic Survey coming down heavily on rising retail participation in Futures & Options in the stock market and terming such speculative trading has “no place in a developing country” such as India, the CEA said it is not a systemic concern as of now but poses a threat to capital formation in the country. 

“The important point is we don’t want it to become a systemic concern. Right now, it is not a systemic concern at all in terms of the magnitudes and the sums involved and the number of people involved. It is important not to let it become one and that is why we are voicing these concerns and also from the point of view of aiding capital formation in the economy. If households end up losing unnecessary money in trading Futures and Options, which historically across the world have turned out to be not so profitable for individual investors. Then it affects their own savings, spending power and therefore their sentiment.” 

This will have a knock-on effect on corporate sectors investment plans and production plans, he added. “We are all for encouraging India’s retail participation in the capital markets but more importantly it should be in products that that help the savers realise their return goals and also provide capital for productive purposes.” 

Nageswaran believes the market regulator SEBI is best equipped to address the concern. 

Speaking on the impact of the global situation on the inflation trajectory, the CEA said there is no immediate threat but there is a possibility of supply disruptions, which can temporarily impact inflation trajectory coming down steadily. 

He said it is pertinent that the government’s focus must turn to bottom-up reform and strengthening the ‘plumbing of governance’ for structural reforms to yield strong, sustainable growth. The CEA is of the opinion that governments at all levels – Union, state and local – must embrace reforms and deregulation to improve governance. 

He highlighted the Chapter 5 in the survey, which explains thoroughly how to boost female labour force participation on supporting MSMEs, on turning agriculture into engine of growth etc but and specific actions that need to be taken. 

Speaking about some economists commenting on the survey that it highlights a rethink of the inflation targeting framework, the economic advisor said “some of the actions that we take in order to control food price inflation do not allow for substitution effect on the part of the consumers to play their part. We may be also distorting consumption patterns, which are detrimental to the health of the consumers themselves and also affecting the evolution of farmers’ incomes. So, it is an issue that needs to be debated.” 

Nageswaran pointed out the 3.2 percent decline in the unemployment figure is based on the periodic labour force survey estimate. He exuded confidence in the Indian economy and about doubling of net payroll additions continuing in the future. “India’s employment generation has not been structurally impeded. It was affected by the balance sheet crisis in the corporate and the banking sector and it was also affected subsequently by pandemic related-disruptions. Now that the balance sheets are in very healthy shape and the Covid-related disturbances have faded away I think the structural dynamics will generate the kind of jobs that we are beginning to see in the last two to three years,” Nageswaran said. 

The growth in the EPFO net subscribers, growth of employment in the factories, all these things are signs that the labour market is intrinsically healthy, he said, adding there are several areas where further actions on the part of governments at all levels can actually boost employment both with respect to males and females.