The Story So Far
NSO's GDP Estimate: India’s GDP grew 8.2% in 2023-24, surpassing all economic forecasts and NSO's advance estimates of 7.6%.
Quarterly Growth: The January to March 2024 quarter saw a 5.9% rise, updated to 7.8%, slower than the previous quarter's 8.6% growth.
Private Consumption: Slightly improved but still weak, impacting the revival of industrial investments.
Growth Prospects for 2024-25
RBI's Projection: The RBI projects 7.2% GDP growth for 2024-25, up from an earlier 7% estimate.
Inflation: Expected to drop to 4.5% from 5.4%.
Industrial output growth slowed to 5% in April.
GST collections hit a high of over ₹2 lakh crore in April but slowed to just under 10% growth in May.
Economists' Views:
Bank of Baroda estimates 7.3%-7.4% GDP growth.
CRISIL estimates 6.8% GDP growth.
Heat waves and a projected above-normal monsoon could influence economic performance.
Impact of Coalition Government on Economy and Reforms
Political Continuity: Prime Minister Narendra Modi returned to office with a coalition government.
Key ministers like Nirmala Sitharaman and Piyush Goyal retained their portfolios.
Economic Outlook:
Fitch Ratings expects strong medium-term growth due to government capex and improved corporate/bank balance sheets.
Challenges include pushing contentious reforms (land and labor) due to coalition dynamics.
Moody’s is less optimistic, citing potential delays in reforms and fiscal consolidation.
Expectations for the Full-Year Union Budget
Finance Ministry's Focus: Continuing reforms to bolster macroeconomic stability and growth.
Budget Consultations: Will involve industry and stakeholders.
Key Areas to Address:
Inflation control
Boosting consumption and investments
Resolving taxation issues affecting MSMEs
GST Council Meeting: Expected to discuss tax regime rationalization.
Manufacturing Focus: Initiatives to integrate Indian manufacturing into global value chains, potentially reducing import tariffs.
Regional Demands: BJP allies may seek specific measures for Andhra Pradesh and Bihar.
Long-term Vision: The Budget will outline plans to make India a developed nation by 2047, based on Niti Aayog's blueprint.
Historical Context
Effective Coalitions: Past coalitions have successfully implemented critical reforms, such as the privatisation drive by the Atal Bihari Vajpayee government.
This Budget could reveal the coalition government's approach to continuing the reform agenda.
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