NITI Aayog member and renowned economist Arvind Virmani, on Saturday, revised his GDP growth forecast for India for the fiscal year 2024-25 (FY’25), downgrading it due to rising global uncertainties, particularly stemming from the United States and China. Virmani, who had previously projected a growth range of 6.5 to 7.5 percent, now anticipates a growth rate of 6.5 to 7 percent, with a higher likelihood of it being below 7 percent, citing the increasing risks and global challenges that have emerged over the past few months.
Virmani, in a discussion during an interactive session with the Merchants’ Chamber of Commerce and Industry (MCCI), explained that his earlier forecast of 6.5-7.5 percent was based on a global outlook that was less encumbered by political and economic risks. However, due to the ongoing uncertainties in the international landscape, especially political instability surrounding the United States elections and a decelerating Chinese economy, he has adjusted his expectations for India’s growth trajectory.
“My original focus from the beginning of the year was to project a growth rate of 7 percent, with a margin of ±0.5 percent, meaning between 6.5 and 7.5 percent. However, in light of recent developments, I am revising this projection to 6.5 to 7 percent, with a high probability of it being sub-7 percent,” Virmani remarked. He cited the US elections, which have contributed to significant global uncertainty, as a major factor influencing this change. According to him, the uncertainty arising from the US elections is not only affecting the US but also has a domino effect on global economies, including Europe, China, and others, indirectly influencing India’s prospects.
Virmani also emphasized the impact of China’s economic slowdown on global risk sentiment. Despite China’s aggressive capacity-building efforts in recent years, the country’s capacity utilization has decreased significantly, leading to an over-supply situation. He called this approach “irrational” and suggested that it, combined with China’s slowing economic growth, has added to global uncertainty and risk aversion. These factors, he warned, could further affect India’s growth, especially in terms of trade, investment, and foreign policy dynamics.
Despite the revised growth forecast, Virmani remained cautiously optimistic about India’s long-term economic prospects. He pointed out that if India can maintain a growth rate of around 6 percent for the next 25 years, it is poised to become an upper-middle-income or even a high-income country. This would allow India to approach China’s economic stature, he argued, positioning the country well for the future.
Virmani also discussed the uneven distribution of investments across Indian states, noting that only a handful of states currently attract the majority of investments, particularly Foreign Direct Investment (FDI). He highlighted that the NITI Aayog is working on creating benchmarks and indices to guide states in improving their investment climates. The objective is to provide actionable insights and encourage states to enhance their capacity to attract both domestic and foreign investments.
“The Modi government recognizes the crucial role of states in economic development and aims to provide tools and frameworks for all states to improve their investment climate and catch up with the leading states,” he added.
International institutions, including the World Bank and the International Monetary Fund (IMF), have projected India’s GDP growth for FY’25 at around 6.4 to 6.5 percent. While these estimates align closely with Virmani’s revised projections, they reflect the global economic challenges India faces in the short term.
In conclusion, while India’s growth prospects have been tempered by global uncertainties, Virmani remains confident that the country has the potential to achieve sustained, long-term economic growth. He emphasized the importance of strategic investments, sound governance, and continued focus on state-level development to ensure that India’s economic trajectory remains positive even amid international headwinds.
