India’s 7.8% GDP growth has come as a positive surprise, but sustaining this pace will not be easy, according to Sanjeev Sanyal, Economic Advisor to the Prime Minister.
In an exclusive interview with India Today, Sanyal said the latest growth numbers were supported by several sectors rather than being driven by one part of the economy. However, he warned that global uncertainty, oil prices and El Nino could put pressure on growth in the coming quarters.
Sanyal said the 7.8% growth was stronger than even he had expected. He pointed to manufacturing, financial services and construction as some of the sectors contributing to the performance.
Investment has also played an important role, he said. While public and government investment remains strong, private companies are also investing at a reasonable pace.
Sanyal described the growth as “very broad-based”, but said the current global environment made it difficult to expect the same pace to continue.
“I would be quite happy with anything in the range of 7%,” he said.
He pointed to the war in Iran, global trade disruptions and tariff-related uncertainty as key risks. The Middle East is also an important export market for India and home to millions of Indians who send remittances back to the country.
Sanyal expects El Nino to have some impact on agriculture, although he does not expect the damage to be as severe as the extreme drought seen in parts of Europe.
With the monsoon still playing out, he said it was too early to estimate the exact impact on growth.
Oil prices are another challenge. Sanyal said India had managed external energy shocks by keeping its sources of supply diversified, including imports from Russia, the US and Venezuela.
He acknowledged that India may have to absorb some of these external pressures, but said the economy was doing well despite the difficult environment.
Responding to criticism over unemployment, inflation and inequality, Sanyal said the hard data did not support the view that the economy was facing widespread household stress.
He cited government labour survey data, which he said showed both rural and urban unemployment gradually declining. He acknowledged that educated unemployment remained a concern.
On inflation, Sanyal said current levels of around 4-5% should be viewed in the context of India’s past. A decade ago, inflation routinely remained in the 8-12% range, he said.
He also pointed to strong consumer demand. Record car sales and healthy purchases of products such as air conditioners, he said, suggested that households continued to spend.
Sanyal also defended the government’s changes to the GDP methodology and base year.
He said the base year could not be updated earlier because the Covid period did not represent normal economic conditions. Once 2024 provided a more typical year, the base was updated.
According to Sanyal, the stronger GDP numbers are also visible in other data, including corporate profitability and car sales.
He expects growth to moderate in the coming quarters, but said India should still record a “very decent” GDP growth rate for the year as a whole.