Government's growth expectations: The government anticipates economic growth of approximately 7 per cent in the upcoming fiscal year, starting on April 1, despite emerging geopolitical risks linked to the Red Sea crisis that could potentially impact global inflation and economic output. The government's Chief Economic Adviser, V. Anantha Nageswaran, and his team presented this outlook in the latest economic review released on Monday.

Highlighting the government's growth prospects outpacing the global economy, the economic review emphasises the resilience of the nation's economy, driven by stable domestic demand and private investment. Concerns have arisen regarding the Red Sea crisis, introducing uncertainties around global supply chains and potentially exacerbating the existing slowdown in global trade throughout 2023.

Economic output and inflation

The economic review acknowledges that prolonged disruptions in supply chains during 2024 could lead to consequences such as altered trade flows, increased transportation costs, and impacts on worldwide economic output and inflation. Despite these challenges, India expresses confidence in its ability to navigate and withstand the emerging disturbances.

This growth projection comes just ahead of Prime Minister Narendra Modi's government presenting its final budget before the impending general election this summer. Finance Minister Nirmala Sitharaman is scheduled to unveil the budget on Feb. 1, considering the growth estimates outlined in the economic review.

Growth projections

The latest projection of 7 per cent growth aligns with the first advance estimates, where the economy was anticipated to expand by 7.3 per cent in the current fiscal year. The review attributes the resilience of domestic demand to government reforms implemented over the past decade, specifically citing the robustness of private consumption and investment.

S&P Global Ratings anticipates India maintaining its status as the fastest-growing major economy for the next three years. The economic review concludes that the strength in the financial sector, coupled with recent and anticipated structural reforms, positions India favourably to sustain a growth rate above 7 per cent in the coming years. While the review anticipates a gradual slowing of headline retail inflation, no specific timeframe is provided. Annual retail inflation rose to 5.69 per cent in December from the previous month's 5.55 per cent.

(with Reuters inputs)