‘Inflation well-behaved, barring some food items’

Asserting that India’s underlying growth story is intact and one must not ‘over-interpret’ the economy’s slowdown in the second quarter of this fiscal year, Chief Economic Adviser (CEA) V. Anantha Nageswaran said on Thursday that the economy’s health remains robust as per several macro-economic indicators and overall headline inflation is ‘well-behaved’.

“There are some specific food items that are contributing to the sharp rise in inflation, but it is confined to a very small percentage of the overall Consumer Price Index basket of goods and services,” Mr. Nageswaran said at an Assocham summit in a session on powering India’s economic transformation. The CEA also emphasised that India’s long term inflation average is coming down and will converge with the pace of price rise seen in developed economies thanks to investments in enhancing the country’s supply-side capacities.

Asking industry to play its part in propping up consumption to drive domestic growth in an increasingly uncertain world economy, the CEA said that corporate profitability hit a 15-year high in 2023-24 but much of this was diverted to reduce their leverage and called for a greater balance between profitability and workers’ incomes.

“Without this parity, there will not be adequate demand in the economy for corporate products to be purchased,” he said, pointing to wage growth for contract workers not keeping pace with inflation.

The upcoming Economic Survey for 2024-25, to be tabled ahead of the Union Budget for 2025-26, will continue with the theme of ‘letting go’ or deregulation of cumbersome mandatory norms for businesses as well as suggest ideas to ramp up the manufacturing and farm sector outcomes. The CEA steers the annual Survey that takes stock of the year gone by and recommends policy ideas and directions for policy makers.