CEA says India poised to grow at 7% this year and for rest of decade

Economic Survey had pegged FY23 GDP growth higher at 8-8.5%

India’s economy is well poised to grow at a sustained rate of seven per cent “as we go into 2023” and for the rest of the decade, chief economic advisor V Anantha Nageswaran said on Tuesday. His projections are lower than the estimate of 8-8.5 per cent GDP growth in the current financial year provided in the government’s Economic Survey in January 2022.

“India recently surpassed the United Kingdom to become the world’s fifth largest economy in absolute terms. While that is a creditable achievement, it is not exactly a surprise,” Nageswaran said in a virtual address at the Global Fintech Fest in Mumbai.

“I think this decade--whether we call it a decade or something more than that--India looks at the moment well poised to repeat a sustained growth rate of around seven per cent for the remainder of the decade as we go into 2023 and beyond,” he said.

The Reserve Bank of India’s forecast for GDP growth in the current financial year is 7.2 per cent. Many analysts, however, expect the central bank to lower its GDP forecasts as the growth in the first quarter of the year far undershot projections.

India’s GDP grew 13.5 per cent in April-June, lower than the RBI’s projection of 16.2 per cent.

For the previous financial year as a whole, GDP growth was at 8.7 per cent, according to the government’s estimate.

Speaking about the future scope of financial technology in India, Nageswaran said a shift was now being observed from the creation of the infrastructure to the creation of the “superstructure”.

“The next phase that happened even as the pandemic was raging was about increasing access to financial services. Credit, insurance, investment (have been) driven by digital platforms and also propelled by fintechs in banking innovation,” he said.

The chief economic advisor stressed upon the crucial need for interoperability in the financial technology space and said India and Singapore would be working to smoothen processes related to remittances and bring down costs.

“…we are going to enable interoperability with Singapore’s e-nets platform so that our workers living in Singapore can remit money back to India instantaneously. This has been facilitated with the UAE as well because remittances from Indian workers overseas is an important component for their families back home,” he said.

While acknowledging the vast scope of financial technology in furthering financial inclusion, Nageswaran however, flagged risks, particularly for those with a low level of financial literacy.

“We’re talking about credit guarantee funds for MSMEs (which) are also cash-flow based lending without any collateral and that is what is both a plus and minus because non-collateral based lending can be done through digital apps. It has also created abuse of the system,” he said.

“There is a need to make sure that cash-flow based lending apps do not exploit borrowers especially if they are financially illiterate. That is why making these things available in the local language is critical in bridging the financial divide and the digital divide,” he said. END