Indian Economy Poised for 6.7% Growth Until 2031, Asserts CRISIL Report
The Indian economy is set to witness sustained growth of 6.7% annually from 2024 to 2031, according to the latest analysis by CRISIL. This positive projection slightly surpasses the pre-pandemic average of 6.6%, signifying a resilient recovery.
Factors Driving Growth
Capital-Driven Approach: CRISIL attributes this growth trend to the government's strategic focus on investment during a period of private sector caution. The substantial increase in capital expenditure, especially in infrastructure projects, coupled with interest-free loans to states, is identified as a key factor propelling the economic momentum.
Current and Future Trends
Robust Current Fiscal Year: After achieving a robust 7.3% growth in the current fiscal year, CRISIL anticipates a moderate slowdown to 6.4% in the next financial year.
Geopolitical Considerations: The report underscores the importance of monitoring the impact of the Middle East conflict on energy and logistics costs, acknowledging potential repercussions on India's economic trajectory.
Inflation Landscape: In December 2023, India's inflation level reached 5.7%, driven by fluctuating vegetable prices and food grain inflation. CRISIL suggests that this scenario might prompt caution from the Reserve Bank of India (RBI) in achieving its four per cent inflation target.
Global Factors and Uncertainties:
US Federal Reserve Actions: CRISIL notes the expected rate cuts by the US Federal Reserve, driven by strong labour market data and higher-than-expected inflation. The uncertainty surrounding the timing and extent of these cuts poses a potential challenge for the global economic landscape.
Government Outlook and International Projections:
Finance Ministry's Perspective: Despite geopolitical risks potentially leading to supply chain disruptions and inflationary pressures, the Finance Ministry anticipates economic growth exceeding 7% in FY24 and close to 7% in FY25.
International Forecasts: Agencies like the International Monetary Fund and the World Bank predict FY25 gross domestic product (GDP) growth in the range of 6.3-6.4%.
Long-Term Goals and Structural Reforms:
Ambitious Targets: The Finance Ministry envisions India becoming a $7 trillion economy by 2030, with aspirations to achieve a $5 trillion economy within the next three years, making it the third-largest economy globally. The government also sets a lofty goal of becoming a developed country by 2047.
The CRISIL report, combined with governmental optimism and international projections, paints a positive picture of India's economic trajectory, underlining the importance of continued policy support and vigilance in the face of global uncertainties.