Alarm bells have been ringing for months about a slowdown in India’s economy. Well, don’t expect any sudden turnaround.
That’s the message from the country’s chief economic advisor, V. Anantha Nageswaran, who’s projecting that the pace isn’t likely to pick up through next year, as hurdles to global trade pile up. We’re looking at flat growth for the time being.
The Economic Survey, released a day before Saturday’s budget, estimates that GDP will grow by 6.3-6.8% in the financial year through April 2026. That’s not too far off the 6.4% advanced estimate that government has for this financial year.
One of the biggest problems — the looming return of trade barriers around the world —is pretty much out of the country’s hands, the report notes.
“The promise of shared benefits from a globalized world with open trade, free flow of capital and technology, and sanctity for rules of the game may be behind us,” the survey says, “It is as unwelcome and unfortunate as it is real.”
War on red tape
Coming to terms with the Trumpiness of world trade dynamics means being more realistic about how much India will be able to export its way to prosperity from here on out. It’s always been an uphill challenge, and it’s only likely to get harder.
That makes it critical to reduce the drag that excess regulation places on domestic growth, the survey says.
“Indian regulations require firms to invest time and money and forgo growth opportunities to ensure compliance,” the survey says. “States can reduce the cost of compliance by liberalizing standards and controls on Indian businesses.”
As for the hot-button topic of AI, Nageswaran says it’s still hard to say whether the tech is making the world better off. But the survey acknowledges that the integration of AI into the labor market is an opportunity to boost productivity, improve workforce quality and create jobs.
The survey also sounds a warning on climate change and its impact on India’s economy, which it describes as the seventh most threatened by climate change in the world. The country urgently needed to undertake climate adaptation, as climate change will have “a direct impact on lives, livelihoods and the economy,” it says.
Perhaps the main scrap of positive news from the survey is that inflation is expected to cool off, with food prices in particular losing their bite.
And if the central bank shares a similar view, India might just see a rate cut next week for the first time in almost five years.
As we said on Thursday, that’s something that’s more likely to boost the overall vibe than anything on offer in Saturday’s budget. Take a look here for our guide on what to expect on that front.
Edited by Tim Hume. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
