Domestic growth, global risks

BUDGET SHOULD LAY GROUND FOR STRATEGIC POLICY MOVE ON INFRASTRUCTURE, ENERGY

- Dharmakirti Joshi Pankhuri Tandon

Unlike the last fiscal year, when India's gross domestic product (GDP) estimates exceeded the Economic Survey's projection, this year's first advance growth estimate at 6.4% trails the forecast of 6.5-7%. That's a little slower than the pre-pandemic decadal average of 6.6%. Alongside, nominal GDP, which absorbs the impact of inflation, grew at 9.7%, lower than the 10.5% pencilled by the Budget.

The global environment is unclear with policymakers staring at a raft of risks. Growth in the major economies has diverged. The US seems to be growing closer to its trend rate of 2% in 2025 after a strong performance in 2024. China is slowing down, while Europe should be below trend despite some improvement in growth.

The nature of risks is evolving with Donald Trump, the new US president, threatening to impose tariffs. India, which has a trade surplus with the US, will keep a close watch on these developments. Other geopolitical uncertainties await resolution. The Survey factors these uncertainties, and presages India's real GDP growth next fiscal year to range between 6.3% and 6.8%, close to Crisil's call of 6.7%.

Multilaterals have also started lowering their growth expectations for next year. The International Monetary Fund foresees 6.5% for this and next year, while the World Bank has forecast 6.7% for next year. Despite moderation, India will see the fastest growth among large economies.