PK Basu upends IMF estimates, foresees 8.4% growth for India next year

Budget 2024: In the lead-up to the anticipated interim budget announcement, PK Basu, Chief Economist of ICICI Securities expressed a bullish outlook on India's economic growth, challenging prevailing global projections.

Basu contends that the International Monetary Fund (IMF) is underestimating India's growth potential for the current year and the next two years. Contrary to widespread estimates, he predicts a robust 7.9 per cent growth for the present fiscal year, followed by 8.4 per  cent expansion in the subsequent year.

Highlighting key economic indicators, Basu highlights a significant reduction in India's external debt to GDP ratio, from 24 per cent in 2014 to approximately 17.5 per cent currently. He believes this positions the country for a credit and investment-led acceleration in economic activities.

Growth rates redefined

Expressing his dissatisfaction with the consensus amongst economists, Basu questions why a 6.5 per cent growth rate is considered satisfactory. He argues that, excluding the pandemic-affected years, India has maintained an average growth rate of 7.5 per cent over the past seven years, establishing a new normal in the trajectory of the nation's economic progress.

Attributing the temporary deviation to the global impact of COVID-19, Basu asserts that India could have achieved an average growth of 8 per cent, emphasising that the pandemic was an unusual circumstance with an unusual effect on the Indian economy.

Standout performance in steel 

In a nod to India's resilience in the face of global economic challenges, Basu points to the country's standout performance in the steel industry. While global steel production in 2023 saw a negligible increase of 0.03 per cent, India recorded a 12 per cent growth in steel production, exemplifying its economic strength on the world stage.

Drawing attention to China's ongoing financial woes, including a debt crisis and collapsing sectors, Basu sees an opportunity for India. He suggests that if India can capture one-third of China's textile and garment export market, it could effectively address the issue of unemployment within the country.

As India eagerly awaits the announcement of the interim budget, PK Basu's optimistic outlook adds a perspective to the ongoing economic discourse, challenging conventional projections and asserting India's potential for substantial growth in the coming years.