The government maintained its 6.5% annual economic growth forecast, betting that growth momentum would continue and that both rural demand and private investment would increase. Addressing the press conference after the release of GDP data for the June quarter, chief economic adviser V Anantha Nageswaran said inflation is expected to moderate, and deficient rains are unlikely to have a significant bearing on overall growth.
“There is momentum in economic activity in general, and it is not driven by price-related distortions. Therefore, our projections are still very comfortably placed at 6.5% for the current financial year,” he said, pointing to several high frequency indicators to argue that the September quarter has gotten off to a good start. The Indian economy grew at a rate of 7.8% in the June quarter, outpacing China's and Indonesia's rates of 6.3% and 5.2% respectively.
A portion of the confidence originates from a recovery in rural demand, which he demonstrated in his presentation through some charts, including the largest gain in FMCG sales in eight quarters, an improvement in tractor and two-wheeler sales, and an increase in non-durables (based on IIP statistics). Besides, he said that private sector investment was adding to government capex and that new investment projects announced by the private sector in the first quarter have been the highest in 14 years.