India's Inflation Could Head To 4% During Monsoon, Says CEA Nageswaran

India's inflation could head closer to 4% during this monsoon, according to Chief Economic Advisor V. Anantha Nageswaran. Inflation is within the RBI's reference range, and during the monsoon it could head towards the midpoint of the range, he said.

India's Consumer Price Index-based inflation stood at 4.85% in March. The Reserve Bank of India's inflation tolerance range is between 2% and 6%.

Nageswaran was speaking at an event organised by the National Council for Applied Economic Research in New Delhi on Wednesday.

"Of course, a lot depends on how the monsoon shapes up. Right now, the expectations are that we will have an above-normal monsoon, but spatial and temporal distribution matter," he said, alluding to IMD's prediction of good monsoons on the back of the La Nina phenomenon.

India's growth rate in fiscal 2024 may have come up to 8% owing to the performance of the first three quarters, the CEA said. "If you look at the trajectory of growth in the first three quarters, obviously the possibility that the growth rate touches 8% is quite high."

Addressing domestic issues can help increase the growth rate above 7% for the ongoing fiscal, he noted. "Outcome is beyond our control."

Deregulating compliance and inspections at local and state government levels, continued investment and focus on skilling, as well as the health dimensions of the country's young demography, will help it grow at a steady rate of close to 7%, he said. "The more we address some of the legacy issues, the (growth rate) can even rise further based on the strength of the domestic economy."

The International Monetary Fund has estimated India will grow 6.8% in FY25, while the RBI estimates a 7% growth, with Q1 likely to grow at 7.2%, Q2 at 6.8%, Q3 at 7%, and Q4 at 6.9%.

If these figures materialise, FY25 will be the fourth consecutive year since FY22 that the economy will have grown at 7% or more, Nageswaran said.

According to NCAER Director General and Member of Economic Advisory Council to the PM (EAC-PM) Dr Poonam Gupta, who presided over the panel, India could even grow over 7% in the current year and the next based on domestic strength and favourable global outlook.

“The IMF has projected acceleration in global growth and world trade volume, decline in inflation rates, and oil prices to remain around the current levels. Based on its domestic strengths and a favourable global outlook, the Indian economy may be expected to grow at 7 plus rate this year and the next,” she said.