NEW DELHI: Chief Economic Advisor Anantha Nageswaran on Friday raised growth forecasts for the next fiscal year to 7-7.4% against 6.8-7.2% projected in last month’s economic survey, thanks to improved political certainty due to trade agreements and improvement in capital flows, coupled with high-frequency data indicating continued momentum in consumption and investment.He said the Indian economy is likely to exceed $4 trillion next year. Recent trends point to improving capital flows, especially when the constraint of India’s low exposure to AI is behind it, the CEA added. The government’s chief economist also said that recent trade agreements signed by India will help in the coming months, while also providing political certainty.
“Due to global uncertainty related to capital flows, the exchange rate will have (the effect of) a depreciation in 2025.
And with these trade agreements and the second-mover advantage that India has in the AI ecosystem…all these things will improve capital flows, stabilize exchange rates…which then means that the dollar value of Indian GDP will better reflect the real underlying performance of the Indian economy in rupee terms in the coming years,” Nageswaran said.
“We also have a framework agreement with the United States (in the meantime),” he added.
Although the full impact of these trade deals may be felt in 2027-2028, there (will still be) a positive impact in terms of capital formation in FY 2026-2027, which will spill over to consumption (as well).”
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Citing multiple sets of numbers, he said the growth momentum is expected to continue. “Right now, the risk is to the upside in this range. Of course, global uncertainty is a downside risk factor to take into account.”Nageswaran stressed that the focus on policies and reforms, which are “in our control”, has helped India be among the fastest growing G20 countries, paving the way for “sustained non-inflationary growth of at least 7% in real terms”, post-Covid, even though the exchange rate will not go in India’s favor in 2025.Regarding the GDP growth in the March quarter, Nageswaran said, the momentum in the economy is good enough to give a growth rate of 7.3% or more.