Indian economy facing challenge of lower consumption growth: India Ratings` Devendra Kumar Pant
India Ratings and Research Chief Economist Devendra Kumar Pant has said the Indian economy is facing the challenge of lower consumption growth as high inflation is impacting people in the lower income bracket. He said although the country's economy is now resilient enough to deal with the dual shocks of below-normal monsoon and high global oil prices, the challenge is to bring down inflation so that people can have more disposable income in their hands.
He stated 'One percentage point reduction in inflation will lead to 64 basis points increase in GDP or 1.12 percentage points increase in PFCE (Private final consumption expenditure) growth... If inflation can be brought down by 1 percentage point, it would be a win win.’ PFCE denotes money spent by individuals on goods and services for personal consumption.'
As per the estimates of Ind-Ra, which is a subsidiary of global rating agency Fitch Ratings, PFCE would grow 5.2 per cent year on year in current fiscal, as against 7.5 per cent in last fiscal. Pant said economic growth is being driven by government expenditure and such high level of capex year after year poses risks to fiscal deficit and debt, which in turn will keep interest rates elevated. Besides, the Indian economy grew 7.2 per cent in 2022-23 fiscal and as per government estimates, the growth in the current fiscal would be 7.3 per cent.
