India, now eyes achieving the $5 trillion economy mark by FY27. The target year was earlier envisioned to be 2024–25. (FY25).
Sources told businessline that senior officials of the Finance Ministry, including Economic Affairs Secretary Ajay Seth and Chief Economic Advisor VA Nageswaran, along with Chief Executive Officer of NITI Aayog Parameswaran Iyer, made a detailed presentation on the current economic situation and its outlook to the parliamentary standing committee. Quoting the presentation, sources said current year growth is expected to be between 6.5-7 per cent.
Fall in inflation
Inflation is expected to fall below 6 per cent by March end. However, the rupee is likely to continue depreciating against the US dollar. But the good news is that the unemployment rate is set to fall further with the expected growth in economic activities and well-targeted government schemes increasing inclusivity in the economy, FinMin officers are believed to have said in their presentation.
“India is likely to become a $5 trillion economy by 2026–27 if it grows at an average annual rate of 6.5 per cent with inflation below 5 per cent and US inflation closer to 3 per cent,” said the source attributing it to the presentation. This remark comes at a time when many of the agencies have lowered India’s growth forecast. They expect the growth rate will fall below 6 per cent. Still, the IMF considers India the bright spot in the global economy and projects a growth rate of 6.8 per cent, second after Saudi Arabia.
Need of the hour
According to sources, Ministry officials also said that when slowing growth and high inflation are afflicting most of the world’s major economies, India‘s growth has been robust and inflation is under control. Watchful and prudent fiscal management and credible monetary policy remain essential for India to fulfill its growth aspirations.
Ministry officials also listed some positives that will boost the growth. These include softening commodity prices and normalisation of supply chains, which will improve growth and inflation outlook. The corporate earnings outlook is improving with moderation in input prices. They also highlighted that strengthening credit growth and the flow of financial resources to the commercial sectors point to sustained momentum in activity and that banks need to raise more structural liquidity (deposits) to fund credit demand. “The stable banking sector is a major source of resilience amidst formidable global headwinds,” a source said, attributing it to officials.