Real growth vs. fake arguments: And never the twain shall meet
RBI) had anticipated 8% growth in the first quarter. High-frequency indicators such as GST collections, e-way bills, PMIs for manufacturing and services, among others, have confirmed the economy’s strong growth trajectory. The Monthly Economic Review of the Department of Economic Affairs has been recording its momentum carried forth from the final quarter of 2022-23.
Data for July 2023 has also shown continued growth momentum. Private sector capital formation has begun to kick in; after contracting in 2020-21, it rose 22.4% in 2021-22 and 18.5% in 2022-23, based on the cash flow statements of a consistent sample of over 3,000 companies. RBI too noted strong investment intentions of companies in an article in its August Monthly Bulletin.
RBI reiterated its expectation of 6.5% GDP growth in 2023-24. The ministry of finance too reiterated that estimate, noting that the risks to it are symmetric. Furthermore, we also believe that the growth of 7.2% for 2022-23 will be revised up when the final estimate is released early in 2026.
The balance sheet problems of the Indian corporate and financial sectors in the last decade had hampered India’s economic growth. That is now history. Banks are lending.
Credit growth is in double digits. Companies are beginning to invest. India’s management of the covid pandemic without excessive fiscal and monetary loosening but with an emphasis on targeted relief and accent on public capital expenditure has provided a foundation of economic stability on which the edifice of sustained economic growth and higher living standards will rise in the coming years.
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