Beyond the upswing | What the Board of India Today Economists (BITE) think

Q. The RBI has said the economy is at its Goldilocks moment. Is the country in a strong phase of growth? How sustainable is the trend?Dharmakirti Joshi: The country is currently in a stronger-than-expected growth phase. With an 8.0 per cent print in the first half of the current fiscal year, growth has surpassed expectations. The main drivers have been private consumption, manufacturing and services activity, prompting upward revisions in forecasts from various stakeholders, including the RBI.... We estimate that a 6.5-7 per cent growth trajectory is sustainable for India.Samiran Chakraborty: India’s post-COVID growth recovery has been exceptionally strong, with average GDP growth of last five years exceeding 8 per cent, despite multiple global headwinds.... We acknowledge that the recent growth trends have been supported by timely cyclical fiscal and monetary stimulus through tax and rate cuts, which might taper off next year. But still the momentum in the economy and further emphasis on deregulation-driven supply side reforms should be able to support a 7 per cent-plus growth next year.Ashima Goyal: It is Goldilocks since growth is high and inflation is low—an unusual combination, especially in view of the external shocks we are facing. The reversal of the pandemic-induced as well as last year’s cyclic contraction shows policy has the capability to counter external and domestic shocks to smooth growth—this is the best warranty of a sustainable growth trend..preferred-source-banner{ margin-top: 10px; margin-bottom:10px;}Soumya Kanti Ghosh: India is indeed in a strong and well-balanced growth phase, with stable macroeconomic conditions, moderating inflation, robust domestic demand, and a resilient financial sector. This growth momentum reflects sound policy management. With continued reforms, prudent fiscal policy and sustained public capital expenditure, the growth momentum appears increasingly durable.Neelkanth Mishra: Sticky inflationary pressures emerge only when economic output is close to its potential. The economy currently has significant slack.... For example, output, as measured by GDP, is between 7 per cent and 11 per cent below its pre-pandemic path. India is the only large economy with a rapidly growing workforce, so being 1-1.5 years behind the pre-pandemic path does not create slack in, say, a Japan, China or Europe, where the workforce is shrinking. In India, this means 1-1.5 years of new workers are waiting for employment. Thus, the economy can grow 1-1.5 percentage points faster than its potential growth for a while before a rise in inflation warrants policy tightening.Q. Consumption saw substantial growth this festive season. Is this demand overdrive expected to continue with the GST and income tax reforms in place?Dharmakirti Joshi: Private consumption received a boost from income tax cuts and GST rate rationalisation, which lowered effective tax rates. Also, low inflation supported discretionary spending. Some of these positive effects are expected to spill over into the next year as well. However, for consumption growth to be sustained, there must be improvements in permanent incomes and employment opportunities.Samiran Chakraborty: During the festive season, we observed the ‘price effect’ of the GST cuts. Going forward, it is expected that the savings to monthly expenditure from the GST cuts would create an ‘income effect’ and sustain a higher level of consumption. However, the idea of a stimulus is to kickstart a virtuous economic cycle, which will generate more jobs and income growth.Ashima Goyal: The consumption response to the GST cuts has shown corporates that demand is there—at the correct price. Therefore, they will try to sustain volume growth through price and market strategies adding to government efforts. The RBI has also brought real rates closer to neutral, helping interest-sensitive demand. A positive cycle can set in.Soumya Kanti Ghosh: GST and income tax reforms have improved formalisation, transparency and credit access, which reinforce sustained consumption over time. As incomes rise and employment opportunities expand, especially in urban and emerging sectors, demand is well placed to remain resilient beyond seasonal peaks, as is also indicated by strong UPI and credit card spending.Neelkanth Mishra: GST cuts provided a substantial fiscal boost to consumption in a short period of time.... Credit risk appetite for borrowers as well as lenders has begun to improve, which is likely to drive above-trend growth of 7.5 per cent in the next fiscal year.Q. Is the current phase of growth good enough to boost private investment and ensure adequate jobs that the country badly needs?Dharmakirti Joshi: Government and households have played a significant role in driving the post-pandemic recovery in investments. Despite maintaining healthy balance sheets, corporations have remained cautious about aggressive investment due to ongoing global uncertainty. Recently, however, there are signs of a pickup in corporate investment momentum. The reforms initiated by the government are expected to further strengthen this trend, and securing a trade deal with the US, along with other foreign trade agreements, would help reduce uncertainty and bolster business confidence.... The key question now is how quickly and sustainably this rebound will unfold.Ashima Goyal: The gradual realisation that geo-economic uncertainty can and will be countered to sustain growth will boost private investment and job creation. There are signs that this is happening.Soumya Kanti Ghosh: The current growth phase is conducive to a revival in private investment and job creation. Healthier corporate and bank balance sheets, rising capacity utilisation and policy stability are improving investment confidence. We are already looking at green shoots in the form of new projects announcement already reaching near Rs 50 lakh crore in Apr.-Nov. ’25 compared to all-time yearly high of Rs 57 lakh crore in FY25. We believe that ongoing infrastructure expansion, manufacturing push and skilling initiatives of the government will boost private sector investment and create jobs.Neelkanth Mishra: It is important to remember that corporates invest when they see an opportunity, not to do national service. Their investments are therefore an outcome, not the starting point. The starting point has usually been the real-estate cycle and power generation—both are in a good place cyclically. Private investment has therefore been rising for the past few years... As growth is now reviving, we expect private investments to pick up as well. Above-trend growth is likely to create jobs in a range of sectors. However, the economic slack is substantial, and labour force participation rates are still low, especially among women. It may not be possible to create jobs for every person of working age. To do so, one may need real growth rates above 9 or 10 per cent annually to sustain for many years.Q. How will the uncertainties surrounding US tariffs impact growth? How much of a concern are FPI outflows, the slowing FDI and the falling rupee?Dharmakirti Joshi: Despite global uncertainties, the real sector has remained relatively resilient, as India successfully offset tariff headwinds by strengthening domestic demand drivers. However, capital flows have been volatile. The rupee experienced a sharper depreciation compared to most emerging market currencies. Net foreign institutional investor flows—both in debt and equity—were negative, and foreign direct investment remained subdued during the first eight months of the fiscal year.Samiran Chakraborty: India’s export growth post tariff enactment has held up better than market apprehensions. While it is expected that the tariff-related headwinds might recede going forward, it will be important to continue with the supply side deregulation to improve productivity and look for expansion in alternate markets.... At this point, the persistent BoP (Balance of Payments) deficit is exerting depreciation pressure on the currency. We forecast that the BoP is likely to turn surplus from Q4FY26 but acknowledge that this will be crucial to turn the tide on INR.Ashima Goyal: India’s prime strength is its growing depth and diversity, internally and now in trade also. The excessive US centricity and hype about US tariffs misses this. The pressures on the rupee were not just because of the delay in the trade agreement with the US but also because of the rise in the Current Account Deficit (CAD) in October. The November numbers show this shrinking with a healthy rise in exports and should reassure FPI as well as rupee pessimists. In the longer term, the rupee tends to revert towards a real effective rate of 100.Soumya Kanti Ghosh: USA imposed 50 per cent tariffs on ~ $45 billion worth of major Indian exports. Sectors such as textiles and gems and jewellery, which are primarily labour-intensive industries, will be impacted. With robust GDP and higher export figures in November, growth was almost unaffected this year.... Since April 2, rupee has depreciated by 5.7 per cent, indicating that the 50 per cent tariff imposed on India is one of the major factors behind the current phase of depreciation.... FII outflow is another primary reason for rupee depreciation.Neelkanth Mishra: US tariffs have so far not had meaningful impact on the overall economy, though they have caused and continue to cause stress for several pockets.... On the other hand, services exports continue to grow at a rapid clip.... This is likely to continue, and provide good comfort on Balance of Payments. The slowdown in net FDI is primarily due to the rise in FDI repatriation, as a robust stock market is providing exits to private equity investors as well as multinational firms active in India. These exits are important to attract new risk capital—there is clear evidence that it is now picking up as well. We also believe that as earnings stabilise, with the economy recovering, the net selling by foreign portfolio investors is also likely to abate. There are thus no structural issues with the rupee.Q. Household savings fell to around 18 per cent in 2024. How can they be boosted?Dharmakirti Joshi: To achieve a sustainable improvement in household savings, it is essential to trigger a virtuous cycle of growth, savings and investments. This can be accomplished through a combination of economic reforms that enhance growth potential and employment opportunities, along with measures to raise awareness and incentivise savings—especially in long-term instruments such as pension funds. Such an approach will help establish and reinforce the virtuous cycle necessary for long-term economic stability.Samiran Chakraborty: The decline in net household savings has been more than the gross savings as households are now comfortable to increase their liabilities. As long as these liabilities are creating assets, like mortgages, it is a healthy development. In any case, as the wealth of the country increases, it is likely that the propensity to save for households would come down. So the best way to increase overall household savings is to increase the income levels. Obviously, relative returns and tax policies will determine the allocation of these savings between alternate asset classes.Ashima Goyal: Aggregate Indian savings tend to rise in periods of higher growth. Interest rates affect only the allocation. For example, savings peaked after the high growth period in the 2000s. Aggregate household savings ratios may have fallen, but private corporate savings have risen and government dis-savings have reduced. Household savings are also better allocated today.Soumya Kanti Ghosh: Household savings in India, which had weakened in the post-pandemic period, have begun to recover.... Going forward, savings are likely to strengthen further due to GST rationalisation, which lowers the cost of living and reduces implicit consumption taxes, improving real saving capacity. Along with easing inflation and deeper penetration of formal financial instruments, these factors create a conducive environment for a sustained rise in household savings.Neelkanth Mishra: Savings should first be seen in their entirety. As the real estate market rebounds, physical savings are likely to pick up, which will show that financial savings are slowing—rising household investments are also important for sustaining economic growth. In addition, as there is slack in the labour market, real wage growth is likely to remain weak, and labour share of national income may remain weak. The corollary is that the capital share of income goes up—visible in corporate savings. The measure of savings that reflects aggregate economic saving is the current account; that is likely to remain in moderate deficit, providing stability to the economy.- EndsPublished By: Shyam BalasubramanianPublished On: Dec 19, 2025Tune InMust Watch

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Beyond the upswing | What the Board of India Today Economists (BITE) think

Is the current exuberance in the economy a momentary surge, or does it signal a structural reboot that could extend into the next few quarters? And what more needs to be done to keep the momentum going? Here's what the Board of India Today Economists (BITE) think

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