The government remains confident about its economic growth projection of 6.5 per cent for the current fiscal despite concerns about lower rains and expects food inflation to ease going forward.
“At the moment, we are comfortable with 6.5 per cent and we don’t see downside risks arising. In May, we did say that the risks are evenly distributed on both sides of 6 per cent and 6.5 per cent whereas in January, when we wrote the Economic Survey, we said 6.5 per cent, but downside risks dominated. But we upgraded it to saying that both downside and upside risks are symmetric,” said Chief Economic Adviser V Anantha Nageswaran on whether the government would revisit its growth forecast.
Official data released on Thursday revealed that the economy grew by 7.8 per cent in the first quarter of the fiscal. This prompted some agencies including Morgan Stanley to revisit their GDP forecasts for the fiscal but they remain lower than official projections. While Morgan Stanley has pegged GDP growth at 6.4 per cent from the previous 6.2 per cent in 2023-24, Nomura has raised it to 5.9 per cent from 5.5 per cent it had projected earlier.
In an interview to Business Today, Nageswaran also expressed confidence that the spike in food prices “is a temporary issue” and said the government and the Reserve Bank of India are monitoring the prices and taking measures when necessary.
“Inflation has come back in the last several weeks because of food prices primarily. But core inflation is very well behaved and some of the food prices that went up are on the retreat now. Yes, we are watching. We are keeping an eye on energy prices; we are keeping an eye on food prices. Both the central bank and the government are taking measures within their remit to address them,” he said.
Retail inflation surged to a 15-month high of 7.44 per cent in July this year from 4.87 per cent a month ago as prices of food items, especially vegetables such as tomatoes shot up. Analysts have said it may remain high in August as well.
He further said that he does not expect inflation to turn into a major problem and in fact the rate of inflation will be lower compared to last fiscal. He also highlighted that the current surge in vegetable prices is a seasonal issue.
“Food price inflation in general has always been seasonal in the first quarter and part of second quarter of a fiscal year historically. It does moderate overtime as fresh supplies arrive,” he stressed.
