Indranil Pan, Chief Economist at Yes Bank, shares his views on India’s economy. He believes that in the coming months, we need to closely watch how global prices for things we buy affect our economy, especially with potential new tariffs coming up. Pan suggests that our growth forecast is even lower than others expect, sitting at about 6.2% for the year. The manufacturing sector, which produces goods, has slowed down significantly, growing only 2.2% in the last quarter. This slowdown is also reflected in how the stock market is performing.
He highlights the impact of a weaker Indian currency, which makes production more expensive for manufacturers. Without increased local spending and amidst a slowdown in global demand, he expects production in manufacturing to stay low.
Pan also mentions the government’s spending, indicating there’s been less investment this year. He feels that rather than simply boosting consumer spending through the budget, the focus should be on building infrastructure and encouraging private investments.
When asked about when India might see a recovery in GDP, Pan notes that although the services sector is doing better than the goods sector, urban demand isn’t recovering quickly. He points to higher vegetable prices limiting what people can spend on other things. With inflation high, real wage growth for workers is lagging, reducing potential spending on non-essential items.
Looking forward, Pan sees the upcoming government budget as crucial. He doesn’t expect a significant focus on increasing consumer spending but sees a need for a strong emphasis on infrastructure investment. Additionally, he believes there should be more focus on creating jobs and skills development as this will help boost productivity and, eventually, consumer demand.
For this year, Pan anticipates a GDP growth of 6.2% and a nominal growth of about 9.8%. Next year, he expects to see a bit of growth at 6.6%, hoping for more government spending which can improve the overall economic situation. The expectation is that inflation will ease, which should help real wages grow and lead to better economic conditions.
Leave a Reply