Animal spirits: A revival will ease our fiscal path

livemint.com:

RBI) 8% estimate as well as that of private economists, some of whom had forecast figures as high as 8.5%. The covid lockdown’s shrunken base three years ago has given us magnified Q1 readings, an effect that’s losing force but is yet to wear off. Details of Q1 data bear clues of how well our big state-led heave out of a pre-pandemic slump is doing.

Sector wise, growth was still too uneven, with services and construction doing the heavy lifting, while farming, utilities and factories did modestly. RBI expects this fiscal year to log 6.5% in annual growth, a dip from 2022-23 as a wider base- effect weakens, but still a figure at risk of being missed should global headwinds worsen for trade. The big question, however, is whether private investment is in revival mode, which holds the key to a sustained growth rebound.

The latest data shows that gross fixed capital formation increased 7.9% last quarter. While this echoes the previous quarter’s bounce, it was led by front-loaded capital expenditure by the government, as seen in the extra fiscal space used up (a third of the year’s) and the actual figure under that head, ₹2.8 trillion, up sharply by 59% from a year earlier. Robust as this support has been, we have no evidence of a definitive upturn in private investment, which has been in a slump for the larger part of the past decade.