Pessimism about India’s public debt is overdone

financialexpress.com:

A strong pick-up in private investment is yet to materialise, and the desirable overall investment rate of 35% is still “some distance away”, says TT Ram Mohan, member, Prime Minister’s Economic Advisory Council. In an interview with Priyansh Verma, Mohan says that India’s economy in FY25 will grow at a slower rate than the projected 7% in the current fiscal. “It may be appealing to talk of taking our growth rate to 8% but such talk will not take us anywhere,” he notes. On RBI’s monetary policy, Mohan says that India is not in a position to sacrifice growth in order to reach the 4% inflation target in the short-term.

It has done better than expectations. Most people had expected GDP growth (in FY24) in the range of 6-6.5%. It appears we will end up closer to 7%. That is a commendable achievement in a difficult global environment. At the same time, we must note that some of the growth- as in manufacturing and mining- is on a low base. Contact-intensive services are continuing the strong revival post the pandemic. Overall, jubilation over the Indian economy’s growth rates in the past three years must be tempered by the realisation that these are based on the decline in GDP in the pandemic year of FY21.

The global environment will remain challenging for some time to come. The IMF expects global growth to slow from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024. These forecasts are below the historical (2000–19) average of 3.8%. The medium-term growth forecast of 3.1% for the global economy is the lowest in decades. Oil prices have been moving up in recent months as Russia has found ways to circumvent the oil price cap of $60 imposed by NATO and the EU. Then, we have the prospect of the conflict in Gaza