India’s Projected 6.3-6.8% GDP Growth for FY26 Not a Slowdown, Says CEA
India’s projected GDP growth of 6.3-6.8% for the fiscal year 2025-26, as outlined in the Economic Survey, has raised concerns among some observers who view it as a sign of an economic slowdown. However, Chief Economic Advisor (CEA) V Anantha Nageswaran has dismissed these claims, stating that the growth estimate should be viewed in the context of global economic conditions, not as an indication of domestic decline.
Global Context of India’s Growth Trajectory
- Impact of Global Economic Conditions
Nageswaran emphasized that the projected growth rate reflects a natural adjustment after the high growth figures following the COVID-19 pandemic. He pointed out that the global economic activity index, tracked by the Federal Reserve Bank of Dallas, has been on a downward trend since 2023, placing India’s growth in line with global economic slowdown. This global decline is now in negative territory, impacting economies worldwide, including India’s. - External Uncertainty, Not Domestic Issues
“India’s growth slowdown should be placed in the context of global economic activity trending down,” said Nageswaran. He argued that the uncertainty surrounding global investment and trade flows should not be seen as a domestic slowdown, but rather as a reflection of broader external factors. This, he noted, is something India may have to contend with until the global economic environment stabilizes.
Sustaining Growth: Domestic Factors Matter
- 8% Growth Still Achievable
Despite the global challenges, Nageswaran remained optimistic about India’s future growth prospects. He reaffirmed that achieving a long-term growth rate of 8% is still possible. “Why not? We are focusing on actions we can take domestically without overly relying on global factors,” he said, stressing the importance of domestic policies in driving India’s economic progress. - Focus on Structural Reforms
The Economic Survey 2023-24, released on January 31, outlined a roadmap to accelerate growth through structural reforms. These include deregulation, infrastructure development, and productivity-enhancing measures. Nageswaran emphasized the importance of such reforms in ensuring that India remains on track to achieve its goal of becoming a developed economy by 2047, under the ‘Viksit Bharat’ vision.
Key Focus Areas: Deregulation and Economic Activity
- Shifting Regulatory Philosophy
A key theme in the Economic Survey is the shift from a regulatory philosophy of ‘guilty until proven innocent’ to ‘innocent until proven guilty.’ Nageswaran discussed the potential negative impact of overregulation on economic activity, particularly in the context of GST-related cases against businesses. He argued that while some economic activity will inevitably involve cheating or evasion, excessive compliance measures can stifle business growth. - Balancing Compliance and Growth
Nageswaran explained the dilemma regulators face in balancing the enforcement of compliance with fostering business activity. He suggested that regulations should not be overly intrusive and should prioritize economic activity, acknowledging that a small percentage of individuals will always seek to exploit loopholes. This balance, he noted, is a challenge for regulators and governments worldwide.
Important Points to Consider
- Growth Estimate Context: India’s projected 6.3-6.8% GDP growth for FY26 should not be viewed as a slowdown but as a response to global economic trends.
- Global Economic Environment: The global decline in economic activity has influenced India’s growth trajectory, and this uncertainty is likely to continue until the global environment stabilizes.
- Domestic Growth Potential: Achieving an 8% growth rate remains possible through strategic domestic reforms, without relying on global factors.
- Deregulation Focus: The Economic Survey highlights the need for deregulation and a shift in the regulatory mindset to avoid stifling economic activity.
- Balancing Compliance and Growth: Regulators must strike a balance between enforcing compliance and promoting business activity to sustain economic growth.
In conclusion, while India’s projected growth for FY26 may be lower than recent years, it is not a sign of a slowdown. Instead, it reflects the challenges posed by global economic uncertainty. Through effective domestic policy measures, India aims to maintain its growth momentum and achieve long-term economic goals.
