India made a capex bet during covid. It worked: Arvind Virmani

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₹11.1 trillion for FY25 in the interim budget in February. Virmani said expectations of growth beating estimates this year was really the capital expenditure multiplier of the budget working through the system, which will continue over the years and get better. Building infrastructure is helping not just the GDP growth, but has also added more employment for construction workers, he said.

According to Virmani, India’s economy is expected to grow at over 7% next fiscal (FY25), plus or minus 50 basis points to account for any shocks. Virmani also said that the El Nino effect on farm sector is temporary and unless there is another shock, agriculture output growth will recover in FY25 and that the sector will return to its normal growth rate, lifting agriculturists’ income. The second advance estimate of the statistics ministry said last month that farm output will grow only at 0.7% this fiscal, sharply lower than the 1.8% growth projected earlier, but it revised FY23 farm output growth to 4.7%, up from 4% reported provisionally earlier.

Virmani pointed out that high interest rates in the US and Europe tend to slow down imports into those markets, affecting certain categories of Indian exports, such as engineering goods. Once the interest rates start to go down in those markets, India will see some recovery in those types of exports. “Net exports anyway should improve next fiscal," Virmani said.

Net export has been in the negative zone, indicating import dependence, for over a decade, as per the current GDP data series. Virmani also said that household investments into housing is recovering, supporting the overall private investment growth. Besides, most people are expecting interest rates to soften next fiscal, Virmani