Q3 GDP numbers: Risks outweigh upside potential of FY24 growth, says CEA

Chief Economic Advisor V Anantha Nageswaran on Tuesday said for the upcoming financial year (FY24), downside risks to the real gross domestic product growth rate outweighed the upside potential due to the prevailing global headwinds.

Addressing the media after the release of the October-December FY23 GDP data, Nageswaran said high-frequency indicators showed economic activity was robust enough to achieve 7 per cent GDP growth in the current financial year.

“If you look at downside risks to FY24, they still prevail. Downside risks dominate the upside potential to 6.5 per cent (growth in FY24) because of geopolitical uncertainty. Unknown-unknowns are aplenty because we don’t know how oil, food, and fertilisers will behave in FY24 due to conflict and weather-related events,” Nageswaran said.

“We need to be prepared for tighter financial conditions globally and weather-related factors -- all these things need to be watched. FY24 may not see as big a shock as early months of FY23 when the war (Russia-Ukraine) had just broken out, but some of the factors are still simmering, and we still need to be watchful about that,” the CEA said.

The 2022-23 Economic Survey, Nageswaran’s first as CEA, projected 6.5 per cent as baseline growth for FY24, within a range of 6-6.8 per cent.

“However, the scenario of subdued global growth presents two silver linings – oil prices will stay low, and India’s current account deficit will be better than currently projected. The overall external situation will remain manageable,” he said.

About October-December FY23 (Q3), Nageswaran said manufacturing appeared to have slowed down due to rising input costs, but added that growth was steady and broad-based across sectors. He said the Q3 headline number of 4.4 per cent growth was also due to a high-base effect, and that the manufacturing growth rate is expected to be robust in the January-March quarter.

“The momentum in the economy seems strong and stable and there is nothing to suggest that we won’t be able to get to 7 per cent for the year,” he said.