Pick up in consumption contingent on controlling inflation: India Ratings & Research
As per the estimates of Ind-Ra, which is a subsidiary of global rating agency Fitch Ratings, PFCE would grow 5.2 per cent year on year in current fiscal, as against 7.5 per cent in last fiscal.
The Indian economy is facing the challenge of lower consumption growth as high inflation is impacting people in the lower income bracket, India Ratings and Research Chief Economist Devendra Kumar Pant said on Sunday.
He said although the country's economy is now resilient enough to deal with the dual shocks of below-normal monsoon and high global oil prices, the challenge is to bring down inflation so that people can have more disposable income in their hands.
"One percentage point reduction in inflation will lead to 64 basis points increase in GDP or 1.12 percentage points increase in PFCE (Private final consumption expenditure) growth... If inflation can be brought down by 1 percentage point, it would be a win-win," Pant said in an interview to PTI. PFCE denotes money spent by individuals on goods and services for personal consumption.
As per the estimates of Ind-Ra, which is a subsidiary of global rating agency Fitch Ratings, PFCE would grow 5.2 per cent year on year in current fiscal, as against 7.5 per cent in last fiscal.
Pant said economic growth is being driven by government expenditure and such high level of capex year after year poses risks to fiscal deficit and debt, which in turn will keep interest rates elevated.
"Until private corporate investment starts and government withdraws some of the investment they are doing, the economy will not have a stable growth path," Pant said. The Indian economy grew 7.2 per cent in 2022-23 fiscal and as per government estimates, the growth in the current fiscal would be 7.3 per cent.
Pant said there are two kinds of India in terms of income bracket -- one is people from upper income and the other those in the lower income bracket. The wages of people at the bottom end of pyramid are not growing at the same pace as the people in organised sector or people in upper end.
"We have done a study and found that people at the bottom 50 per cent bracket face a higher inflation compared to people in the top 50 per cent of population. Prices of the good and services consumed mainly by the people in the bottom of the pyramid is growing faster than what is consumed by upper end of the pyramid," he said.
Retail or consumer price index based inflation rose to a 3-month high of 5.55 per cent in November, mainly due to rise in food prices.
Catch the latest stock market updates here. For all other news related to business, politics, tech, sports, and auto, visit Zeebiz.com.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Senior Citizen Latest FD Rates: Know what major banks like SBI, PNB, Canara Bank, HDFC Bank, ICICI Bank are providing on fixed deposits
Gratuity Calculator: Rs 38,000 as last-drawn basic salary, 5 years and 5 months of service; what will be gratuity amount?
EPFO Pension Schemes: Early pension, retirement pension, nominee pension and 4 other pension schemes that every private sector employee should know
Top 5 Small Cap Mutual Funds with best SIP returns in 1 year: See how Rs 25,000 monthly investment has grown in each scheme
Top 7 SBI Mutual Funds With Best SIP Returns in 1 Year: Rs 25,000 monthly SIP investment in No.1 fund has jumped to Rs 3,58,404
11:37 AM IST