Chief Economic Advisor V. Anantha Nageswaran on Thursday said India’s inflation rate was expected to ease in 2023-24, but added that monsoon-related issues would be a key risk. El Nino conditions could have a bearing on the monsoon, which in turn, would have an impact on food prices, inflation and economic growth, he said.
Mr. Nageswaran was speaking on ‘Have global headwinds delayed India’s March to $5 trillion economy?’, organised by the Chennai International Centre at the Ethiraj College for Women. He pointed out that there was global uncertainty caused by higher inflation and higher interest rates, creating tight financial conditions. In 2022, developed economies saw a high inflation rate of 8-9%, compared with their average of 2%, while India saw an inflation rate of 7%. He said an economic slowdown in the U.S. might have positive implications.
A slowing economy would lead to a pause in interest rate increases in the U.S., which would result in the Reserve Bank of India stopping its rate hikes. Factoring in for currency fluctuations, India would likely be a $3.4 trillion economy in 2022-23 and could become a $5 trillion economy by 2025-26 or 2026-27, and reach $7 trillion by 2030, he said. One of the key things to watch out for this year was China’s recovery, which would have an impact on commodity and oil prices.
To a question on whether India’s economy was sliding back to a ‘Hindu’ rate of growth, he stressed that India’s growth was not stagnating.