Chief Economic Advisor V. Anantha Nageswaran, on Thursday, said the economy is expected to grow at 6.5 per cent in the current fiscal notwithstanding deficient rains in August.
India recorded economic growth of 7.8 per cent in the April-June quarter of 2023-24 against 13.1 per cent in the year-ago period.
"There is momentum in economic activity in general and it is not driven by price-related distortions. Therefore our projections still are very comfortably placed at 6.5 per cent for the current financial year," he said.
Risk is evenly distributed to around 6.5 per cent growth projection for FY2023-24, he said while briefing media following the release of first quarter GDP numbers.
Rising crude prices may warrant attention and prolonged geopolitical uncertainty and likely tighter financial conditions with continued monetary tightening can pose challenges to growth, he added.
With regard to price situation, Nageswaran said food inflation is likely to subside with the arrival of fresh stock in the market and government pre-emptive measures.
Tomato prices are likely to decline with the arrival of fresh stocks by early September while enhanced imports of tur dal are expected to moderate pulse inflation, he said.
However, he said, August rain has been deficient and both the government and the Reserve Bank will be watching the food price developments.
During the first quarter, inflation stood at 4.6 per cent, lower than many developed and emerging economies.
"Food inflation was dominated by specific commodities. So, I think there is no real cause for concern that inflation would spike out of control and both the government and the Reserve Bank are taking measures in their respective domain to ensure that there is adequate supply and availability and that any price increase is moderated," he said.
With regard to fiscal deficit, Nageswaran said there is no threat to the 5.9 per cent fiscal deficit announced in the Budget despite the expected shortfall with respect to disinvestment.
To finance the fiscal deficit in 2023-24, the net market borrowings from dated securities are estimated at Rs 11.8 lakh crore. The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at Rs 15.4 lakh crore.
In budget estimates 2023-24, the finance minister had that the total receipts other than borrowings and the total expenditure are estimated at Rs 27.2 lakh crore and Rs 45 lakh crore respectively. Moreover, the net tax receipts are estimated at Rs 23.3 lakh crore.
Continuing the path of fiscal consolidation, the government intends to bring the fiscal deficit below 4.5 per cent of GDP by 2025-26.
Talking about drivers of growth, Nageswaran said investment and consumer momentum will underpin solid growth prospects over the upcoming year.
The private sector capital formation, supported by the Government's capex push, is underway, and that is a big plus for economic growth, employment and income gains for households, he said.
Expansion of public digital platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes would boost manufacturing output, he said.
A slowdown in the global economy and trade may moderate export growth, but it may be overall better for India, he added.