Economy to grow at 7.4% this fiscal: PHDCCI

Industry body PHD Chamber of Commerce and Industry (PHDCCI) expects Indian economy to grow 7.4 per cent this fiscal and 7.5 per cent in 2025-26, its Chief Economist and Deputy Secretary General S P Sharma said on Wednesday.

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This growth projection —much higher than the RBI’s projection of 7 per cent —is “bit conservative” as the year 2024 is widely expected to see some global growth slowdown, Sharma said, elaborating on the chamber’s economic outlook for the current year.

Indian economy grew 7.7 per cent in the first half this fiscal. PHDCCI projection of 7.4 per cent for entire fiscal would imply that the chamber is anticipating growth of 7.1 percent in second half.

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“This forecast of 7.4 percent for 2023-24 does not mean that we are not bullish about second half. We are little bit conservative as it has been the trend in last few years that growth has been lesser than first half. We anticipate geo-political tensions may cause slowdown in world economy,” Sharma said.

World Bank has, in its latest Global Economic Prospects report released on Tuesday, highlighted that the global economy is set for weakest half-decade performance in 30 years.

Sharma asserted that Indian growth story is intact and that the country was growing at more than 7 per cent in post-pandemic years. “We have a promising future and that is pushing people to strive for higher economic growth. Headwinds are there but no major large economy other than India is growing more than 7 per cent. Reforms undertaken by government are having positive impact,” he said.

In next five years, India’s share in global GDP will be 4 per cent, up 0.8 percentage points from 3.2 per cent now.

Noting that there is now good positive environment for business, Sharma said that 2023-24 would be a year of consolidation of Indian economy and would move into $4-trillion zone in 2024-25. 

“We are expected to be a $7-trillion economy by 2030. Downside risk to Indian growth is geo-political conflicts and impact on inflation. Fragmentation can cause volatility in commodity markets and that can cause inflationary pressures,” Sharma said.

Positive side

On the positive side, PHDCCI expects retail inflation to consolidate this fiscal at 4.5 per cent, providing the room for RBI to cut repo rates by 100 basis points (in tranches) by the end of this calendar year to propel growth. “We are only challenged by inflation. There is no other major concern. If inflation softens and becomes more benign, RBI has room to cut it by 100 bps in tranches this year,” Sharma said.

Ranjeet Mehta, Executive Director, PHDCCI said that private sector investments are showing an uptick and are expected to gain momentum in coming months.

Asked about potential impact of upcoming general elections on economic growth, Sharma said that demand trajectory becomes strong in election years, but there is a downside of inflationary pressures. “We have observed that inflation becomes high in post-election quarters and that’s why we are only at 7.5 per cent projection for next financial year. Considering election year, we anticipate CPI inflation of 4.5 per cent this fiscal. Otherwise, it would comfortably come down to 4 per cent as desired by RBI,” he said.

Sharma added that there is no past evidence to show that GDP always goes up post general elections. “There is no positive correlation on this,” he said.

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